PAPSS rolls out blockchain platform for African fiat exchange

The Pan-African Payments Settlement System (PAPSS) has launched a new currency marketplace aimed at simplifying trade and enabling direct currency swaps between African countries without relying on the United States dollar or euro.

The details 

• PAPSS’ CEO Mike Ogbalu announced the launch on June 26 during the annual meeting of Afreximbank, the system’s parent organization, held in Nigeria.
• He said the new system will allow African currency swaps without needing to first bridge to any “hard currency.” 
• The system is built on the Bantu blockchain and designed by African blockchain infrastructure provider Interstellar. 

Dive deeper 

• Interstellar and Bantu Blockchain’s chief operating officer, Victor Akoma-Philips, first mentioned the currency marketplace during a webinar to explore the naira-pegged stablecoin cNGN’s use cases earlier this month. 
• According to him, Afreximbank launched the African currency marketplace as an improvement on the limitations of PAPSS’ initial model, the Instant Payment Settlement system (IPS). 
• The IPS plans to utilize prefunded settlement accounts opened by commercial banks to settle trades across borders in local currencies and then balance the books at the end of each day. 
• Akoma-Philips said that this model was not completely insulated from the United States dollar (USD), which was still used at the backend to settle trades. 
• He said,

“The goal [of PAPSS] was to make Africans trade amongst each other using just local currencies, but there was a problem. The problem was that even though, that was the idea in front, settlement in the back still needed dollars.” 

• As a result, PAPSS brought in Interstellar as design partners on a payment system that was truly peer to peer and settled in African local currencies. 

How it works 

• To facilitate currency movement on the platform, Interstellar simulated local fiat-pegged stablecoins like the cNGN onchain to settle transactions in local currencies among the countries in the marketplace. 
• He said,

“PAPSS called us [Interstellar] because of the experience we have in building blockchains and working with the cNGN team. We created a semblance of stablecoins to use for corporate settlements, and that is what we have been using [to move funds across African countries].” 

• Before its commercial launch, Afreximbank piloted the currency marketplace last year in Ghana, Kenya, Nigeria, and later, Cameroon.
• However, since the start of the year, membership of the currency marketplace has grown to 19 countries, Akoma-Philips added. 
• According to him, international companies such as Dangote, Qatar Airways and Huawei have been using the currency marketplace to move their funds out of African countries. 

Why this matters 

• Sub Saharan Africa is the most expensive region to send money to, with every transfer into an African country costing an average 8.45% fee as at the third quarter of 2024, per the World Bank. 
• Costs can rise to as much as 20% in some African countries, further highlighting the bottlenecks surrounding remittances into these countries. 
• Afreximbank launched PAPSS in 2022 with the sole aim to solve these payment issues and drive free trade among African countries using local currencies.