Global: Web3 Innovations Catalyze Financial Inclusion and Dollarization in the Global South

In today’s interconnected world, the movement of money across borders can either empower nations or restrain them. For far too long, the global financial system has favored the privileged few, leaving many countries in the Global South struggling with economic inequality and the consequent political instability. However, Web3 technologies are disrupting traditional norms, offering new avenues for financial inclusion and economic empowerment. This transformative narrative features digital currencies like Bitcoin and USDC as catalysts, bridging gaps and transforming lives.

Consider the cumbersome process of wiring money from Nigeria to Ghana, which often takes longer and costs more than physically transporting cash across borders. This inefficiency arises because traditional wire transfers route through financial hubs like New York and London before returning to Africa.

Recognizing the dire need for improvement, innovators like Nigeria’s Dickson Nsofor embarked on a mission to create a better solution. Four years ago, he founded Korapay, a Pan-African payment infrastructure company that saw blockchain and cryptocurrencies as means of exchange rather than speculative assets. Nsofor’s vision gave birth to a platform that harnessed these Web3 innovations for cross-border payments.

Today, Korapay stands as Nigeria’s largest cross-border business-to-business remittance service, processing billions in payments through Bitcoin, USDC, and other cryptocurrencies while settling transactions in traditional fiat currencies. Remarkably, many global enterprises use Korapay’s services to seamlessly exchange Nigerian naira for US dollars, often without realizing that they are engaging with cryptocurrencies and stablecoins. This demonstrates how pioneers like Nsofor are fundamentally reshaping the foundations of traditional finance from the grassroots up.

Why are stablecoins like USDC gaining such traction in Africa? The answer lies in the broader context of economic disparities, currency volatility, and the desire for financial autonomy.

In Nigeria, for instance, over 40% of the population is under the age of 15, and these young individuals are embracing cryptocurrencies as a means of transcending the limitations imposed by local currencies. With the surge in mobile internet access, freelancers and gig workers can now opt for payment in digital assets that offer superior value retention compared to local fiat currencies susceptible to hyperinflation and market devaluation. In an interview for my upcoming book, “Web3: Charting the Internet’s Next Economic and Cultural Frontier,” Nsofor explained how every young Nigerian employee on his team prefers to be compensated in USDC, USDT, or even Bitcoin, recognizing these assets as more stable and useful stores of value.

This shift toward dollarization, where local populations favor assets like USDC over their native fiat, carries profound implications beyond financial convenience. It represents a monumental shift in economic opportunities, enabling individuals to work for internet-native organizations globally and accumulate wealth in stable digital assets.

While the long-term impact of dollarization on these economies remains uncertain, it could potentially destabilize fragile governments in volatile regions by causing the local currency to depreciate significantly. Some central banks, like the Central Bank of Nigeria, initially opposed cryptocurrencies and even considered banning them. Although there have been recent indications of regulatory frameworks for stablecoins and tokens, the consequences of these measures remain uncertain. Likewise, the former governor of the Bank of Pakistan, Reza Baqir, once proposed a ban on all digital assets due to concerns of dollarization. However, such drastic actions never materialized, and Baqir is no longer in office.

Despite these challenges, the adoption of digital assets continues to advance. Even the U.N. High Commissioner for Refugees has turned to blockchain technology to distribute digital cash to displaced individuals in conflict-ridden areas like Ukraine, enhancing fund security and showcasing the broader appeal of digital assets.

The growing acceptance of cryptocurrencies and blockchain technology in Africa and beyond is not merely a financial trend; it is initially a strategy for survival, which eventually becomes a platform for economic prosperity. Above all, it stands as a testament to the resilience and innovation of the Global South. Let us acknowledge the potential of Web3 technologies to pave the way for a more inclusive and equitable financial future for all.