PAPSS rolls out blockchain platform for African fiat exchange

The Pan-African Payments Settlement System (PAPSS) has launched a blockchain-powered currency marketplace designed to simplify trade and facilitate direct currency swaps between African countries. The system purportedly eliminates the need for reliance on the United States dollar or the 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 an X video chat to explore the naira-pegged stablecoin cNGN’s use cases earlier this month. 

• According to him, Afreximbank launched the marketplace to complement PAPSS’s original Instant Payment Settlement (IPS) system.
• The IPS uses prefunded settlement accounts opened by commercial banks to facilitate cross-border transactions in local currencies, with settlements reconciled at the end of each day.
• However, the system still required U.S. dollars for final settlement. The new model removes that dependency entirely.
• Akoma-Philips 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, such as the cNGN, to settle transactions in local currencies among 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. 
• Companies, including Kenya Airways, Continental RE and Zep RE, 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 of solving these payment issues and driving free trade among African countries using local currencies.