Stablecoins: the new battle for African cross-border payments, from Luno to Yellow Card

Sending money from one African country to another is often still slower and more expensive than sending it to Europe. Most transfers still go through the correspondent banking system: the money passes through two or three intermediary banks, often located outside the continent, before it arrives. Each step adds a delay, a currency conversion, fees, and a compliance check that can block the transaction. A transfer that should take seconds can take several days.

It is over this problem that a quiet battle is now being fought, in which stablecoins, cryptocurrencies whose value is pegged to the dollar or another currency, play a growing role. The acquisition in September of Kenyan company GTXN by the Luno platform is the latest episode.

Luno buys regulated “rails”

Luno, a cryptocurrency exchange founded in South Africa by Marcus Swanepoel and Timothy Stranex, has acquired GTXN for an undisclosed sum. GTXN is a Kenyan specialist in cross-border payments and foreign-currency treasury management for businesses, licensed as a fund manager by Kenya’s Capital Markets Authority. Its founder, Dan Kleinbaum, remains at the helm. It is his second exit in six years: he co-founded Beyonic, a mobile money platform present in seven African countries, bought in 2020 by MFS Africa, now Onafriq.

For Luno, the point of the acquisition is to obtain already-licensed infrastructure for collecting and paying out money, under its direct control. Rather than routing its clients’ payments through a chain of correspondent banks, it can route them through its own circuits, drawing on its own liquidity reserves. GTXN becomes the group’s cross-border payments arm.

A group reorganised around businesses

The deal is part of a broader reorganisation. In July, Nigeria’s securities regulator admitted Luno’s Nigerian subsidiary into its regulatory sandbox, allowing it to offer crypto products there under supervision. In August, Luno announced it was cutting 20% of its global workforce, specifying that only about 5% of roles were affected in Nigeria, Kenya and Uganda.

The group has reorganised into three divisions: a consumer exchange merged with a “crypto as a service” offering for banks and fintechs, already used by Discovery Bank in South Africa; a division devoted to stablecoins and wallets, which is notably involved in the rand-backed stablecoin ZARU, with Sanlam and EasyEquities; and a division dedicated to institutions and payment settlement. That is where GTXN fits in.

Why stablecoins

A stablecoin moves on a blockchain, twenty-four hours a day, without depending on banking hours or correspondents. For a company that needs to pay a supplier in another country, it can serve as an intermediate step: the local currency is converted into a stablecoin, sent in minutes, then converted back on arrival into the recipient’s currency. If both conversions are cheap, the whole process can be faster and cheaper than a conventional transfer.

In countries where dollars are regularly scarce in the banking system, stablecoins also offer a form of access to the digital dollar, which explains their popularity with individuals and businesses alike in Nigeria, Kenya and South Africa. That is also what worries some regulators, who fear capital outflows that escape exchange controls. Between the promise of efficiency and the risk of rules being circumvented, central banks are still looking for the right balance, and their answers vary widely from one country to another.

Competition is already in place

Luno is not alone. Yellow Card, a pan-African stablecoin infrastructure specialist, raised $40 million in August from investors including Standard Chartered. The company says it supports more than 50 currencies in more than 50 countries, with clients such as Visa, Mastercard, PayPal and Coinbase. Onafriq, the payments network that bought Dan Kleinbaum’s previous startup, has extended its settlements in USDC, Circle’s dollar-backed stablecoin, to more than 40 African markets.

The signs are multiplying elsewhere: Nigerian fintech Kredete announced the acquisition of Gravv to expand its stablecoin payment infrastructure, and several startups in the sector have raised funds in recent months. The market is moving from the experimentation stage to the infrastructure stage, used by companies that do not present themselves as crypto players.

A concrete example

Take a Kenyan importer who has to pay a Nigerian supplier. The traditional way, they buy dollars with their shillings, their bank sends a dollar transfer that goes through a correspondent bank, often in New York or London, then the supplier’s bank receives the dollars and converts them into naira. Each step has its cost and its delay, and an intermediary bank can suspend the transaction for checks.

With a provider using stablecoins, the shillings are converted into a stablecoin in Kenya by a licensed player, the stablecoin is sent in minutes to a partner in Nigeria, which converts it into naira and pays the supplier into their bank account or mobile wallet. The importer never handles cryptocurrency themselves: they see a payment in shillings at the start and in naira at the end. The whole question is whether the two conversions cost less than the traditional banking chain, and whether each step complies with the exchange rules of both countries.

Regulators at the table

All this is happening while the rules are being written. In South Africa, the Treasury and the central bank have put out for consultation draft capital flow management regulations and a draft manual governing crypto assets in cross-border transactions. A major South African bank recently joined the criticism of the draft, which part of the industry considers too restrictive. Luno has said publicly that it wants the final rules to preserve access to licensed and regulated tools such as GTXN, rather than restrict them.

For African businesses that trade across borders, this competition is good news: it promises faster and cheaper payments. But victory will not be decided by technology alone. It will be decided by licences, compliance and regulators’ trust. That is exactly what Luno went looking for by buying GTXN: not one more technology, but licences and banking relationships, the scarcest assets in the sector.