Same Promise, Different Risks
The rise of stablecoins — digital tokens designed to maintain a fixed value, often pegged to a fiat currency like the US dollar — has reignited old questions about the nature of money, trust, and financial stability. Their promise of “stability” hides a paradox: they resemble traditional money in form, but their backing and governance mechanisms differ radically.
At first glance, stablecoins appear to echo a model long familiar to African economies: mobile money. From M-Pesa in Kenya to Orange Money in West Africa, mobile money systems have transformed payments and inclusion by allowing millions of people to store and transfer value digitally, outside traditional banks. Both mobile money and stablecoins operate on digital platforms, rely on private intermediaries, and claim to serve the same goals — faster, cheaper, more inclusive financial transactions.
Yet behind this apparent similarity lie deep structural differences that lead to divergent implications for consumer protection and financial stability.
1. The Structural Mirage: Two Systems, Two Anchors
Mobile money systems are built on a simple and transparent model: every electronic unit issued is backed one-for-one by deposits held in commercial banks or, increasingly, in safe custodial accounts supervised by central banks. These funds are typically segregated and subject to prudential oversight. The monetary anchor is thus clear and domestic — the national currency — and the regulatory framework defines who is responsible in case of default.
Stablecoins, on the other hand, claim a similar 1:1 backing, but their reality is more complex. The reserves may include not only bank deposits but also short-term securities, commercial papers, or crypto-assets. Their governance depends on private issuers, often offshore, with limited transparency and no formal prudential regulation. When a stablecoin issuer promises convertibility “on demand,” the risk lies in whether that promise can be fulfilled under stress.
The “stable” in stablecoin is therefore conditional. If reserve assets lose value, if liquidity dries up, or if investors lose confidence, redemption demands can trigger a run — reminiscent of money market fund crises. The collapse of TerraUSD in 2022 illustrated how quickly this can happen when algorithmic mechanisms replace real reserves.
2. The Consumer Protection Gap
In Africa, mobile money users benefit — at least in principle — from regulatory safeguards. National central banks or telecom regulators impose capital, liquidity, and segregation requirements. User funds are protected even if the mobile operator fails. In Kenya, the Central Bank has strengthened these rules to ensure that the float — the aggregate of customer balances — is fully backed and regularly audited.
By contrast, holders of stablecoins such as USDT or USDC have no deposit insurance, no guaranteed redemption rights, and no recourse mechanism if reserves are mismanaged. Their protection depends entirely on the issuer’s credibility and disclosure.
In other words, mobile money is supervised money; stablecoins are self-regulated promises.
This asymmetry matters, especially as stablecoins gain traction in emerging markets as a hedge against inflation or currency depreciation. In Nigeria, Ghana, or Kenya, an increasing number of users convert naira, cedis, or shillings into dollar-pegged stablecoins via crypto apps. For the individual, this may feel like financial empowerment; for the system, it may represent a progressive dollarization that erodes monetary sovereignty.
3. The Financial Stability Angle
Mobile money contributes to financial stability more than it threatens it. By facilitating digital payments, reducing cash dependence, and connecting users to formal financial channels, it deepens the financial system. Central banks can monitor transaction flows, integrate mobile money data into their liquidity assessments, and even leverage these systems for fiscal transfers or monetary policy experiments (as seen in Ghana and Côte d’Ivoire).
Stablecoins, in contrast, operate outside the perimeter of domestic monetary control. When residents use dollar-pegged tokens to settle local transactions, they bypass the national payment system and central bank oversight. This creates blind spots for regulators and complicates monetary policy transmission.
Moreover, large-scale adoption of foreign stablecoins can generate systemic risks:
- sudden outflows of local currency into dollar assets,
- disruption of bank deposits,
- challenges for AML/CFT monitoring,
- and the risk of contagion from crypto market turbulence into the real economy.
Ironically, the very attribute that makes stablecoins attractive — a stable external value — can destabilize local economies.
4. Lessons and Policy Implications
The contrast between mobile money and stablecoins offers important lessons for regulators worldwide.
- Same functions, different risks. Both systems perform monetary and payment functions but differ in the nature of their backing and oversight. Regulation must therefore focus not on technology, but on the function performed — issuance of money-like instruments to the public.
- Transparency and supervision are non-negotiable. For any digital token to serve as a reliable means of payment, users must know who holds the reserves, how they are managed, and what happens in crisis situations.
- Cross-border coordination is key. As stablecoins are inherently borderless, fragmented national responses may fail. African regulators could leverage their experience in mobile money supervision to help shape global norms on digital tokens.
- Central banks should stay in the driver’s seat. The debate is not whether to ban or embrace stablecoins, but how to integrate them within a coherent monetary architecture that safeguards stability — possibly through central bank digital currencies (CBDCs) or public-private hybrid models.
5. The Convergence Ahead
In the long run, the line between mobile money, stablecoins, and CBDCs may blur. Some African fintechs are already exploring blockchain-based mobile money backed by fiat reserves, offering interoperability across borders. The challenge could be to combine the innovation of stablecoins with the trust architecture of regulated mobile money.
Financial stability will depend less on the technology than on the quality of governance, transparency, and supervision that underpin digital money systems.
Stablecoins may look like mobile money — but only one of them truly rests on a stable foundation.
By Estelle Brack, Nairobi, 31 October 2025
Reflexions 