Can Your Business Actually Save Money by Switching to USDT? Here’s the Math

In Kenya’s dynamic yet volatile economy, stablecoins like Tether (USDT) and USD Coin (USDC) are emerging as transformative financial tools.

Pegged 1:1 to the US dollar, these digital currencies offer stability, affordability, and accessibility, addressing challenges like currency depreciation, high transaction costs, and limited access to global financial systems.

This blog explores why stablecoins are gaining traction in Kenya, how businesses are adopting them for payments and savings, the role of startups like Kotani Pay leveraging the Celo blockchain, and the potential impact of proposed Virtual Asset Service Provider (VASP) regulations.

Why Stablecoins Are Gaining Traction in Kenya’s Volatile Economy

Kenya’s economy faces persistent challenges: the Kenyan shilling has depreciated significantly, losing value against the US dollar in recent years, with inflation rates eroding purchasing power.

For businesses and individuals, holding or transacting in shillings can lead to financial losses, while accessing USD through traditional banks is costly and restrictive.

Stablecoins, backed by reserves to maintain a stable value, offer a compelling alternative. Here’s why they’re gaining traction:

Stability Against Volatility: Unlike cryptocurrencies like Bitcoin, which fluctuate wildly, USDT and USDC maintain a 1:1 peg with the USD. This stability makes them reliable for transactions and savings in an economy where the shilling’s value can drop rapidly. For example, in 2024, the shilling weakened by over 15% against the USD, pushing businesses to seek alternatives to preserve capital.
Low-Cost Cross-Border Transactions: Traditional international payments in Kenya incur fees of $25–$50 per transaction and take 3–7 days due to intermediary banks. Stablecoins enable near-instant transfers with fees as low as 0% to 1%, making them ideal for businesses and freelancers engaged in global trade.
Financial Inclusion: With 83% of Kenyans using mobile money platforms like M-Pesa, stablecoins integrate seamlessly with mobile-based fintech solutions. They provide access to global financial systems for the unbanked or underbanked, who lack traditional bank accounts but own mobile phones.
Hedging Against Inflation: In an economy where inflation erodes savings, stablecoins act as a digital store of value, allowing users to hold USD-pegged assets without needing a foreign bank account. This is particularly appealing for small businesses and individuals.

Businesses Adopting Stablecoins for Payments and Savings

Stablecoins are no longer a niche concept in Kenya; they’re being adopted by freelancers, SMEs, and remittance services to streamline operations and protect against economic volatility. Here are real-world examples:

Freelancers in the Gig Economy
Kenyan freelancers, a growing segment of the workforce, are increasingly paid in USDT or USDC for work on global platforms like Upwork or Fiverr. This bypasses the delays and 10%+ fees of international bank transfers. For instance, a freelancer earning $500 in USDC can convert it to shillings via platforms like Kotani Pay, retaining more of their income.
Small and Medium Enterprises (SMEs)
Pezesha, a Kenyan lending platform, partners with Kotani Pay and the Celo blockchain to facilitate blockchain-powered loans. By receiving international funds in stablecoins like Celo Dollar (cUSD), Pezesha provides working capital to SMEs, enabling merchants to access global funding without currency conversion losses. This has empowered small businesses in retail and agriculture to scale operations.
Remittance Services
Remittances are a lifeline for many Kenyan households, but traditional services charge high fees. Stablecoins offer a cheaper alternative, with transactions costing up to 20 times less. Overseas workers use platforms like Kotani Pay to send cUSD, which recipients convert to shillings via M-Pesa, reducing costs and delays.
E-commerce and Retail
Some Kenyan merchants integrate stablecoin payments to accept global transactions. Kotani Pay’s API allows businesses to receive USDT or USDC and convert to shillings instantly, shielding them from currency volatility and enabling seamless international trade. This is particularly valuable for e-commerce platforms targeting overseas customers.

Kotani Pay and the Celo Blockchain: Driving Stablecoin Adoption

Kotani Pay, a Kenyan fintech startup, is at the forefront of stablecoin adoption in Africa, leveraging the Celo blockchain to make digital currencies accessible and practical.

Celo is a mobile-first blockchain designed for low-cost, fast transactions, aligning perfectly with Kenya’s mobile-driven economy. Kotani Pay’s innovations include:

On/Off-Ramp Solutions: Kotani Pay’s APIs connect blockchain networks to local payment channels like M-Pesa, enabling instant conversion of stablecoins (USDC, USDT, cUSD) to shillings. This protects users from crypto volatility and simplifies adoption for businesses and individuals.
SMS-Based Blockchain Wallet: To reach users without internet access, Kotani Pay offers a non-custodial wallet accessible via SMS. This allows rural Kenyans to send, receive, and manage stablecoins, ensuring financial inclusion in underserved areas.
Microloan Initiatives: In 2024, Kotani Pay partnered with Mento Labs, Haraka, and Clixpesa to distribute over 1 million cKES (a Kenyan shilling-pegged stablecoin on Celo) to 150 microentrepreneurs. By using community-driven creditworthiness scores, this programme democratises access to finance for small businesses.
Business Integration: Kotani Pay’s API enables merchants to accept crypto at retail, with stablecoins converting to local currency. This expands stablecoin use cases to everyday commerce, from grocery stores to online marketplaces.

By leveraging Celo’s lightweight blockchain, Kotani Pay ensures transactions with minimal fees and fast settlement, making stablecoins a viable solution for Kenya’s economic challenges.

The Impact of Proposed VASP Regulations

The Virtual Asset Service Provider (VASP) Bill, supported by the Blockchain Association of Kenya, aims to regulate crypto businesses, including stablecoin platforms.

These regulations could shape the future of stablecoins in Kenya. Here’s their potential impact:

Increased Compliance and Transparency: VASP regulations require platforms to implement anti-money laundering (AML) and know-your-customer (KYC) standards, aligning with global frameworks like SOC 2. While this builds trust, it may raise onboarding costs for startups like Kotani Pay. However, enhanced security encourages adoption by risk-averse businesses.
Market Legitimacy: Clear regulations legitimise stablecoins, reducing perceptions of crypto as a speculative asset. This could drive more businesses to adopt USDT and USDC, as regulatory clarity mitigates risks and fosters confidence.
Challenges for Startups: Evolving regulations may impose stricter reserve requirements or audits for stablecoin issuers, increasing operational costs. For example, USDC’s monthly transparency through monthly audits by Grant Thornton sets a high standard that smaller providers may struggle to meet.
Support for Financial Inclusion: Regulations aligned with global standards could promote partnerships between fintechs and banks, expanding stablecoin access. However, overly restrictive policies could stifle innovation if not balanced with flexibility.
Regional Expansion: Kotani Pay’s compliance efforts have enabled it to enter South Africa, Cameroon, Ghana, and Tanzania. Favourable regulations support stablecoin adoption, but inconsistent policies across Africa could complicate cross-border operations.

Can USDT Replace USD for Kenyan Businesses?

While stablecoins like USDT and USDC offer significant advantages, replacing the USD entirely faces challenges:

Regulatory Uncertainty: Until VASP regulations are finalised, businesses may hesitate to adopt stablecoins fully, fearing future compliance burdens.
Infrastructure Barriers: Despite mobile penetration, internet access in rural areas limits blockchain wallet adoption, though solutions like Kotani Pay’s SMS wallet mitigate this.
Trust in Stablecoin Issuers: USDT has faced scrutiny over reserve backing, raising concerns about long-term stability. USDC’s transparency provides more confidence, but public education is needed to build trust.
Liquidity and Conversion: Converting stablecoins to shillings requires robust on/off-ramp solutions. While Kotani Pay addresses this, scaling to millions of users remains a challenge.

Despite these hurdles, stablecoins are closer to complementing than replacing USD, offering a digital alternative for transactions and savings in a volatile economy.

Why Stablecoins Are an Enduring Topic for Kenya

Stablecoins address fundamental economic challenges in Kenya:

Currency Depreciation: By holding USDT or USDC, businesses and individuals preserve wealth against shilling depreciation.
High Transaction Costs: Stablecoins reduce fees and delays for cross-border payments, which is critical for businesses in global trade.
Financial Access: Mobile-first solutions like Kotani Pay extend blockchain benefits to the unbanked, aligning with Kenya’s fintech innovation.

As Kenya’s fintech ecosystem grows and regulations like the VASP Bill provide clarity, stablecoins are on track to play a pivotal role in reshaping how businesses and individuals navigate the economy.

Call to Action: Ready to explore stablecoins for your business? Discover how platforms like Kotani Pay can help you integrate USDT or USDC for seamless payments and savings. Stay informed about Kenya’s crypto regulations to navigate this evolving landscape!