De-Fi could solve Africa’s foreign exchange problems, neo-bank CEO says

Forex liquidity and currency swaps are hard to access for many in Africa, which limits the use of dollar-based services in the continent’s import-dependent economy. This creates a vacuum that decentralized finance could solve, leveraging cryptocurrencies, blockchain networks and services (DApps), according to the CEO of Canza Finance Pascal Ntsama IV.

Ntsama said the neo-bank’s new DeFi technology, Baki, aims to address this challenge by providing a decentralized FX exchange for African currencies, enabling slippage-free swaps at central bank rates.

Speaking with Cointelegraph, the CEO and co-founder of Canza Finance, a neo-bank enabling decentralized cross-border payments for Africans, claimed that using Baki for FX trades in Africa creates a hub for businesses to participate in intra-African trades and FX trades at a reduced cost. This also creates a favorable business environment for intra-African trades.

When exchanging naira for cedis, funds exit Africa, causing inflation in the dollar value and increased costs due to currency slippages. Baki addresses this by enabling traders to swap currencies without loss, trading at official central bank prices.

DeFi in Africa is projected to show an annual growth rate of 21.99% and reach over half a million users by 2027. However, industry experts have argued for revisions to these projections as grassroots penetration of blockchain products continues to record new highs.

In response to whether Baki’s services would be acceptable in countries like Nigeria, where Blockchain technology hasn’t been fully implemented even after the policy approval, Ntsama said Baki is built to work with the current regulatory climate as it leverages existing user behaviors to tackle problems that exist with blockchain technology. He maintained that a positive shift in regulation would bring more industrial and institutional adoption for Baki.

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Ntsama said that in a conventional FX swap, the Agent assumes local currency risk until they can recycle the position, necessitating the pricing of that risk for the buyer. Baki reduces these risks by swapping similar currencies at the official rate, enabling the agent to swap again with minimal slippage when entering USD positions.

According to Ntsama, users and entities providing liquidity for Baki earn yield from the 80bps fee charged on every currency swap in the system. This yield is split with 50% to the Liquidity Providers, 25% to Canza Finance native tokenholders and 25% to Canza Finance as an entity.

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Sourced from cryptonews.net.

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