Implications of the US GENIUS Act for Stablecoins in African Markets
The passing of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, signed into law on July 18, 2025, is set to have a significant impact on financial inclusion and stability in Africa. The Act establishes a comprehensive federal framework governing payment stablecoins in the U.S., aiming to improve market integrity and reduce risks associated with unregulated digital assets.
Carmelle Cadet, CEO and founder of EMTECH, has stated that the passage of the GENIUS Act will have a substantial impact for central banks and financial regulators worldwide. In Africa, regulators could adapt their reserve requirements and transparency mandates to create stablecoin frameworks that prioritize consumer protection and financial stability.
Initiatives like Nigeria's eNaira, a central bank digital currency, could complement private stablecoins, offering a state-backed alternative. The widespread adoption of U.S.-regulated stablecoins, backed by high-quality liquid assets and issued under strict regulatory oversight, could provide a trusted digital payment alternative and enhance cross-border remittances and trade.
The regulatory clarity and protections embedded in the GENIUS Act are expected to increase investor and consumer confidence globally, making stablecoins a safer tool for inclusion in emerging markets, including Africa. The Act requires "permitted payment stablecoin issuers" (PPSIs) to maintain full reserve backing and comply with anti-money laundering and consumer protection rules, mitigating systemic risks often associated with unregulated digital assets.
The Act could foster trust and competition in the stablecoin market, empowering African businesses and consumers to participate more fully in global finance. However, it's important to note that the Act does not address the issue of custodial risk, leaving African users vulnerable to significant losses if a stablecoin issuer or custodian goes bankrupt, as seen with the 2022 TerraUSD collapse.
Stablecoins, digital currencies pegged to assets like the U.S. dollar to maintain price stability, have gained popularity due to their viability for everyday transactions and cross-border payments. Stablecoins like Circle's USDC and Tether's USDT offer price stability, making them attractive options for African economies facing challenges like limited access to stable, reliable financial services and volatile local currencies.
The GENIUS Act also allows nonbank entities, such as tech giants like Amazon, to issue stablecoins, which could divert funds from traditional banks. This development could potentially disrupt the financial landscape, leading to innovation and partnerships involving African fintechs and stablecoin issuers, fostering broader financial access.
In Sub-Saharan Africa, a majority of the population remains unbanked. The wider adoption of U.S.-regulated stablecoins could provide a much-needed digital payment alternative, enhancing financial inclusion. However, there is a risk of corruption and conflicts arising if stablecoin issuers gain undue influence over regulators in countries with governance challenges.
Other African countries, including South Africa and Kenya, have also worked on policies for virtual assets. The Pan-African Payment and Settlement System (PAPSS) could potentially use stablecoins in its system in the future. Everything, including cash, deposits, bonds, stocks, gold, real estate, can be tokenized, offering a digital alternative for various financial assets.
The Ghana Central Bank released a draft of guidelines for digital assets in 2024 and is currently signing up virtual asset providers. The passage of the GENIUS Act has the potential to accelerate the mainstream adoption of regulated U.S. stablecoins on the continent, ushering in a new wave in finance. The Act takes effect as early as January 2027 or upon issuance of implementing regulations, allowing stakeholders time to prepare for compliance, but also signaling an impending era of more secure, regulated stablecoins with potential positive spillovers on financial inclusion and economic stability worldwide, including in Africa.
- The GENIUS Act's impact on financial regulators worldwide, as stated by Carmelle Cadet, could lead African regulators to prioritize consumer protection and financial stability by adapting their reserve requirements and transparency mandates for stablecoin frameworks.
- With the GENIUS Act enabling nonbank entities like tech giants to issue stablecoins, there is potential for African fintechs and stablecoin issuers to form partnerships, leading to innovation and broader financial access in Sub-Saharan Africa.
