Stablecoins vs. PAPSS: The Future of Intra-Africa Payments

• As the AfCFTA digital settlement platform evolves, a two-horse race  is emerging: Stablecoins vs. PAPSS, pitting a private-sector digital dollar alternative against a continental public-sector solution with SMEs caught in the middle, hoping for lower fees.

Across the sprawling markets of Lagos, the textile shops of Johannesburg, and the cross-border trading posts of Malawi and Zambia, a quiet revolution is underway in how money moves. For decades, a small-scale trader in Nairobi sending payment to a supplier in Johannesburg faced a labyrinth of costs and delays: currency conversions into US dollars, intermediary bank fees, and settlement times stretching into days. The friction has been one of the most persistent drags on intra-African commerce, estimated to cost the continent billions annually in lost economic activity.

But two competing visions have emerged seeking to solve this problem. One is the Pan-African Payment and Settlement System (PAPSS), a flagship initiative of the African Continental Free Trade Area (AfCFTA) designed to enable instant, local-currency transactions across borders. The other is the quiet but explosive growth of stablecoins, which are basically crypto assets pegged to the US dollar. Increasingly, stablecoins are being adopted by businesses and individuals out of sheer necessity.

For the roughly 40 million micro, small, and medium-sized enterprises (SMEs) across Africa that form the backbone of the continent’s economy, the stakes could not be higher. The outcome of this competition will determine whether they can finally access the kind of SME cross-border fee reduction that has long been promised but rarely delivered. At the heart of the debate is a fundamental question: Should Africa build its own public infrastructure, or will private digital dollars solve the problem faster?

The PAPSS Promise: A Continental Ambition

When the Pan-African Payment and Settlement System went live in January 2022, it represented the culmination of decades of pan-Africanist economic thinking. Conceived by the African Export-Import Bank (Afreximbank) in collaboration with the African Union Commission, PAPSS was designed to dismantle the colonial-era financial architecture that forced African countries to route payments through European or American banks.

The vision is elegant in its simplicity. Instead of converting the Ghanaian cedi into US dollars to pay a supplier in Nigeria who then converts dollars into naira, PAPSS allows the transaction to settle in cedis at one end and naira at the other, with the system netting out positions centrally. This eliminates the hard currency requirement and dramatically reduces transaction costs.

According to Mike Ogbalu III, CEO of PAPSS, the system has already delivered meaningful savings. In an August 2025 statement, he noted that PAPSS has “reduced intra-Africa cross-border transaction costs among participating countries and enabled savings of up to 27 per cent for end users”. The growth metrics are impressive: participating commercial banks have experienced transaction volume surges of over 1000 per cent through digital channel integration.

The institutional momentum is building. As of late 2025, PAPSS had connected 18 countries across four African regions, with more than 150 commercial banks and 14 switches on board. Algeria became the 18th country to join in August 2025, a significant addition that strengthens the system’s presence in North Africa ahead of the Intra-African Trade Fair. Major banking groups including Standard Bank of South Africa, Ecobank Togo, Kenya Commercial Bank, and Nigeria’s Access Bank and UBA have all signed memorandums of understanding, extending PAPSS’s effective coverage to more than 40 countries.

The political backing is equally strong. Wamkele Mene, Secretary-General of the AfCFTA Secretariat, has positioned PAPSS as central to the broader digital trade agenda. Speaking at the Digital Cooperation Organization’s General Assembly in February 2025, Mene explained that initiatives such as PAPSS are critical to “accelerating Africa’s digital economy” by “reducing cross-border barriers and strengthening digital ecosystems”. For policymakers, PAPSS is not merely a payments platform, it is an instrument of economic sovereignty.

The Stablecoin Surge: Adoption by Necessity

While PAPSS advances through central bank corridors and ministerial briefings, a different kind of financial revolution has been gathering pace on mobile phones and trading apps. Stablecoins, cryptocurrencies designed to maintain a fixed value, typically against the US dollar, have found a fervent user base across Africa.

The numbers are staggering. According to dLocal’s Emerging Markets Payments Handbook 2025, stablecoins now make up over half of Africa’s crypto transaction by volume. In Nigeria, where foreign exchange shortages and currency volatility have become chronic, businesses and individuals have turned to USDT (Tether) and USDC (USD Coin) as a store of value and medium of exchange.

Badi Sudhakaran, co-founder and chief product officer of the Africa-focused crypto exchange VALR, argues that this trend reflects fundamental economic realities. “Despite de-dollarization rhetoric, most people and institutions still view the dollar as king and a safe haven asset compared to their local African currencies,” Sudhakaran told Bitcoin.com News. “This isn’t just sentiment, it’s based on decades of relative stability and global acceptance”.

The scale of adoption has prompted extraordinary claims. In mid-2024, BitMEX founder Arthur Hayes asserted that a US banking executive had told him that one-third of Nigeria’s entire GDP now flows through USDT. While Sudhakaran cautions that such claims are difficult to verify given the decentralized nature of crypto transactions, he confirms that “the underlying trend is undeniably real. Africa has emerged as the world’s largest beneficiary of USD-based stablecoins and the drivers are clear: currency instability, the need for inflation hedging, and the critical requirement for efficient cross-border payments”.

VALR’s own metrics illustrate the trend. Stablecoins now account for 40 per cent of the exchange’s overall transaction volumes and VALR has become a global top-ten minter of USDC, a feat Sudhakaran says “reflects not just South African demand but broader African adoption patterns”.

The Conduit-Onafriq Partnership: A Template for Hybrid Models

The most significant development in this space may be the convergence of traditional African payment networks with stablecoin infrastructure. In February 2026, Conduit, a cross-border payments platform powered by stablecoins, announced a partnership with Onafriq, one of Africa’s largest digital payments network.

The partnership’s implications are profound. Onafriq’s network connects one billion mobile money wallets and 500 million bank accounts across more than 40 African countries. By integrating Conduit’s stablecoin infrastructure, Onafriq can now offer same-day payments into multiple markets, where traditional systems such as SWIFT can take days to settle. The companies will enable Onafriq to onramp payments in USDC and manage its global treasury using stablecoins.

Luke Khohere, Onafriq’s Group Chief Product and Innovation Officer, framed the partnership as a logical evolution. “Conduit’s infrastructure will help us move toward streamlining our global treasury management through stablecoins and drive faster payouts for our customers,” Khohere said. “Onafriq is focused on building a foundation to power more seamless payments across all of Africa, and we believe stablecoins represent a massive stepchange in what is possible”.

Kirill Gertman, Conduit’s co-founder and CEO, was equally explicit about the market dynamics. “Onafriq is a global poster child for the impact a fintech can have in a developing market, offering fast, reliable, and accessible money movement in Africa, which has not been served well by traditional banking options,” he said.

The numbers support their optimism. Conduit reported that the number of African customers transacting on its platform grew by 80 per cent between the third and fourth quarters of 2025 alone. This is not hypothetical future demand; it is existing market behavior accelerating rapidly.

The Cost Comparison Stablecoins vs. PAPSS: What Matters for SMEs

For the small and medium-sized enterprises that constitute the vast majority of African businesses, the theoretical debates about financial sovereignty matter less than a simple question: How much does it cost to move money?

The traditional correspondent banking model has been punishingly expensive. The United Nations has targeted keeping cross-border transaction costs below 3 per cent, but African remittance and payment corridors have frequently exceeded this threshold by wide margins. Currency volatility adds another layer of cost and uncertainty, as SMEs must price in the risk of exchange rate movements during settlement periods.

PAPSS claims significant progress on this front. The 27 per cent savings for end users that CEO Ogbalu cites translates into meaningful reductions in the all-in cost of cross-border transactions. By eliminating the need for dollar intermediation, PAPSS removes both the explicit conversion costs and the implicit risk of currency fluctuation. The COMESA Digital Retail Payments Platform (DRPP), a sister initiative launched in October 2025, explicitly aims to keep transaction costs below 3 per cent.

Stablecoins offer a different value proposition. Transaction costs on the blockchain can be negligible, often pennies regardless of transfer size, but the on- and off-ramping into local fiat currencies introduces costs that vary significantly by market.

In Nigeria’s thriving peer-to-peer market, the spreads have become competitive enough to support massive volume. The trade-off is currency risk: while the stablecoin itself holds its dollar peg, the conversion back into local currency exposes users to the same exchange rate movements they were trying to avoid.

There is also the question of accessibility. PAPSS requires banking relationships and integration with formal financial institutions. Stablecoins can be accessed with a smartphone and an internet connection, making them potentially more inclusive for the informal traders who dominate cross-border commerce in many regions.

The World Bank’s Global Findex data shows that while financial inclusion has advanced, 20 per cent of adults in Sub-Saharan Africa still lack access to formal financial services. For these unbanked traders, mobile money and, by extension, stablecoins may represent the only viable path to participating in cross-border trade.

The Adoption Gap: Awareness and Integration

Despite PAPSS’s technical achievements and institutional backing, a significant gap persists between the system’s capabilities and its actual usage by SMEs and individuals. As a September 2025 analysis noted, “While the banks have stepped up staff training and adoption, many small and medium businesses as well as individuals across Africa are unaware of the payment system”.

This awareness gap is not trivial. Payment systems exhibit strong network effects: the value of the system increases with each additional user, but early adopters bear the costs of learning and behavioral change. For a small trader who has been using informal hawala systems, cash couriers, or dollar-based transfers for years, switching to an unfamiliar system requires a compelling reason.

Stablecoins face their own adoption challenges. Regulatory uncertainty varies dramatically across the continent’s 54 countries. As Sudhakaran noted, “navigating 54 different countries, each with disparate financial systems and varying levels of regulatory clarity, requires significant investment in both capital and expertise”. This fragmentation has deterred global crypto exchanges from establishing direct presences in many African markets, leaving room for local players like VALR to dominate.

There is also the question of trust. Central banks have issued warnings about crypto risks, and the volatility of unpegged cryptocurrencies has created justified skepticism. Stablecoins solve the volatility problem but remain dependent on the integrity of their issuers and the stability of their collateral. The collapse of TerraUSD in 2022 serves as a reminder that not all stablecoins are created equal.

Read also: Rwanda and Tanzania to pilot EAC’s low-cost, cross-border money transfer system

Regulatory Divergence: Two Paths to the Same Destination?

The regulatory landscape for cross-border payments in Africa is fragmenting along predictable lines. PAPSS enjoys the explicit backing of the African Union, Afreximbank, and participating central banks. It is the officially sanctioned solution, integrated into the AfCFTA framework and promoted at the highest levels of continental governance.

Stablecoins occupy a more ambiguous space. Some countries such as Nigeria, have attempted to restrict crypto activity while witnessing massive peer-to-peer adoption. Others, like South Africa, have moved toward regulatory clarity, positioning themselves as hubs for compliant crypto businesses. The patchwork creates complexity but also opportunity for platforms that can navigate multiple jurisdictions.

The academic literature on digital interoperability highlights the importance of harmonized frameworks. As researchers noted in a recent AIB Insights article, “lack of standardized digital protocol and compatibility of digital regulations and laws” represents a significant barrier to seamless cross-border payments. PAPSS solves this by creating a unified system that participating countries agree to adopt. Stablecoins solve it by operating outside traditional regulatory frameworks entirely, a feature that is simultaneously their greatest strength and greatest vulnerability.

The Geopolitical Dimension: De-Dollarization vs. Dollar Digitalization

The competition between PAPSS and stablecoins carries geopolitical overtones that extend far beyond payments technology. PAPSS is explicitly positioned as a tool for de-dollarization, reducing Africa’s dependence on the US dollar and the corresponding vulnerability to US monetary policy and sanctions. The African Currency Marketplace (ACM), launched by PAPSS earlier this year, aims to create a “dollar-free transactional environment across the continent”.

Stablecoins, paradoxically, achieve the opposite effect. While they enable faster, cheaper payments, they do so by denominating value in US dollars. Every stablecoin transaction reinforces the dollar’s role as the global unit of account and store of value. As Sudhakaran noted, “USD-based stablecoins may prove more effective than the AU initiative known as PAPSS for cross-border payments”, effective for users, perhaps, but not for the goal of reducing dollar dependence.

This creates an awkward tension for African policymakers. Embracing stablecoins means accepting continued dollar dominance. Pushing PAPSS means betting on a homegrown solution that has yet to achieve critical mass. The political risks are real: US President Donald Trump’s administration has explicitly threatened punitive measures against countries that actively encourage abandoning the dollar. African nations pursuing de-dollarization through PAPSS must weigh these geopolitical consequences.

What SMEs Actually Need: Speed, Cost, and Certainty

For the SME owner in Accra trying to pay a supplier in Nairobi, the ideological debates are secondary. What matters is getting the payment to arrive quickly, at predictable cost, without losing value to fees or currency fluctuations.

PAPSS offers the promise of settlement in local currencies, eliminating exchange rate risk for the transaction period. It is institutionally backed and integrated with the formal banking system. But it requires both parties to have accounts at participating banks, and it requires awareness that the system exists.

Stablecoins offer near-instant settlement, minimal transaction fees, and accessibility via mobile phone. They work 24/7, including weekends and holidays when traditional banking systems are closed. But they introduce complexity in converting to and from local currency, and they require users to manage their own private keys or trust third-party custodians.

The Conduit-Onafriq partnership suggests a possible synthesis. By integrating stablecoin infrastructure with established mobile money networks, the partnership creates a user experience that feels familiar while benefiting from the efficiency of blockchain settlement. Users continue using the same mobile money interfaces they already know; the stablecoin layer operates invisibly in the background.

This hybrid approach may represent the most plausible path forward. Rather than forcing a choice between PAPSS and stablecoins, the market may reward solutions that combine the strengths of both, the regulatory compliance and local currency settlement of PAPSS with the speed and low cost of stablecoin rails.

The Future pf AfCFTA digital settlement: Coexistence or Competition of Stablecoins vs. PAPSS?

Predicting the trajectory of African payments requires humility. The continent’s diversity defies easy generalization, and solutions that work in one corridor may fail in another. What seems clear is that both PAPSS and stablecoins will continue to grow, and their coexistence will shape the options available to SMEs.

PAPSS benefits from political will and institutional backing that no private initiative can match. As more countries join and more banks integrate, the network effects will compound. The system’s ability to settle in local currencies addresses a genuine pain point that stablecoins cannot replicate. For formal sector businesses with banking relationships, PAPSS may become the default choice for intra-African payments.

Stablecoins benefit from user-driven adoption that no top-down initiative can replicate. People use them because they solve real problems: currency instability, expensive remittances, slow settlement. The growth trajectory is organic and self-sustaining. For informal traders, freelancers receiving payments from abroad, and anyone seeking to hedge against local currency depreciation, stablecoins offer a practical solution that exists today.

The most interesting developments will occur at the intersection. If central banks embrace stablecoin technology, perhaps by issuing their own central bank digital currencies that interoperate with PAPSS, the current opposition could transform into integration. If platforms like Conduit continue building bridges between crypto rails and traditional payment networks, the distinction between “PAPSS payments” and “stablecoin payments” may blur from the user’s perspective.

AfCFTA digital settlement: The SME Opportunity

For the millions of African SMEs struggling with the cost and complexity of cross-border trade, the competition between PAPSS and stablecoins is fundamentally beneficial. Both systems are driving down costs and improving speed compared to the traditional correspondent banking model. Both are expanding the range of options available to businesses that have long been underserved by the financial status quo.

The ultimate winner may not be either system but the businesses that learn to use both. A trader might use PAPSS for bank-to-bank transfers with formal suppliers while using stablecoins for smaller, faster payments to informal partners. A manufacturer might receive export payments in stablecoins to avoid conversion delays while using PAPSS to pay domestic suppliers in local currency.

What matters is that the era of expensive, slow, and opaque cross-border payments in Africa is ending. Whether through the public-sector vision of PAPSS or the private-sector pragmatism of stablecoins, the friction that has long constrained intra-African trade is finally being eliminated. For SMEs across the continent, that is not just a technical improvement, it is an opportunity to compete, grow, and participate in the African free trade area that policymakers have long envisioned.

The AfCFTA digital settlement landscape is no longer a matter of theoretical promise but of practical implementation. And as the costs continue to fall, the volume of intra-African trade will rise, bringing with it the economic integration that has been the continent’s dream since independence.

Read also: AfCFTA: Kenya’s bold play for continental trade dominance

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