OVEX is bringing its crypto toolkit to Africa

With solutions to real-world problems such as cross-border payments and trade finance.
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Pioneering crypto exchange OVEX is on a quest to conquer Africa, bringing its crypto toolkit to solve real-worlds problems such as cross-border payments and trade finance.

OVEX CEO Jon Ovadia says an obvious application of cryptocurrency is in the area of wealth preservation. On Tuesday April 12 the US released its latest Consumer Price Index (CPI) figures, with prices climbing 8.5% to levels not seen since 1981 – when Ronald Reagan took the White House from Jimmy Carter. Undisciplined monetary and fiscal policy by politicians and central bankers means US citizens have been stripped of 8.5% of their savings.

Crypto is becoming a popular avenue for those looking to preserve their spending power. Warren Buffett put it this way: “Arithmetic makes it plain that inflation is a far more devastating tax than anything that has been enacted by our legislature. The inflation tax has a fantastic ability to simply consume capital.”

Whether Bitcoin is the store of value everyone is yearning for, only time will tell.

Then there are other less obvious use cases like remittances and trade finance. These are flows OVEX regularly accommodates as SA’s leading crypto prime broker.

Most African cryptocurrency trade is peer-to-peer (P2P) which is highly unregulated. P2P also poses problems for high-volume traders. OVEX is entering these new African markets as a market maker, working with regulators to ensure a safe and secure avenue for high-volume cryptocurrency traders.

As of April 15 2022, OVEX will be able to support high-volume cryptocurrency transactions through the OVEX Over The Counter (OTC) Desk in the following markets: Botswana, Cameroon, DRC, Ghana, Kenya, Nigeria, Senegal, Tanzania and Zambia.

“Africa is becoming a burgeoning hub for cryptocurrency, as an archaic banking system is simply unable to provide the necessary support for the continent’s fast-growing economy,” says Ovadia.

Remittances from Africans working abroad account for 4% to 5% of GDP in some African countries, and more than 20% in Gambia, while the World Bank says the costs of shipping money to family and friends in the home country average more than 12%, and are as high as 32% if you are using Absa.

Using cryptos and stablecoins, those costs can be slashed to 1% or less. Many merchants worldwide are accepting payment in stablecoins, which are crypto facsimiles of fiat currencies but are transmitted and cleared in seconds.

“There are 44 currencies serving the African continent, many of which are rarely traded on the global markets. Currency illiquidity remains the biggest obstacle for both the region’s treasurers and for investors looking to engage in Africa,” says Ovadia.

This, combined with reduced access to cross-border payments infrastructure, throttles Africa’s intra-regional trade. Despite careful attempts to balance social needs and inflation in the formulation of monetary policy in Africa, many countries across the region are still stressed by currency volatility.

The Zambian kwacha, for example, depreciated by approximately 42% against the US dollar in 2015, though it has since rebounded. The devastating impact on the balance of trade and food costs was felt for years afterwards. Similarly, the Angolan kwanza fell by more than 30% following the partial liberalisation of the exchange rate regime at the beginning of 2018.

“Cryptocurrency solves problems like this,” says Ovadia. “BTC [Bitcoin] has already proved valuable as an inflation hedge in countries like Venezuela. It’s allowed people to preserve their wealth and protect against inflation.”

Ovadia says OVEX’s push into Africa is motivated in part by demands from African institutional cryptocurrency investors.

“Institutions have unique needs that most vanilla exchanges fail to fulfil. We’re a prime broker, so you might liken us to a wholesaler in the retail sector. We cater to institutions, family offices, hedge funds and traditional money managers looking to trade high volume crypto transactions with peace of mind.” Learn more about OVEX’s bespoke crypto trading service.

While banks have been slow adopters, the same is not true of hedge funds, family offices and institutions bending to pressure from clients to provide them with exposure to crypto assets. An eye-watering $17 billion worth of institutional capital flooded into cryptos in 2021 alone. Global crypto-themed funds witnessed record net inflows of $9.3 billion in 2021, a 36% increase over 2020, as institutional adoption continues to accelerate.

The specific needs of high-volume African traders include:

1. Post-trade settlement

Large clients want large credit lines to enable immediate trade execution with the delayed settlement, something OVEX is able to offer. Credit lines allow clients to trade now and deposit the funds later. They can also hedge against market volatility by locking in rates before funds settle.

2. Ultra-deep liquidity

Executing high-volume trades at one price with zero price slippage (which normally happens when executing large volume trades on a smaller exchange) is key as these investors buy and sell large volumes on a daily basis.

3. 24/7 service

OVEX maintains a 24/7 communication line between the institutional client and the trading desk, with a personalised relationship manager to guide them through the process and answer queries.

4. Margin services and low spreads

OVEX allows clients to leverage their trading positions,

Tiered fee structure. OVEX high-volume traders pay zero fees and get quoted the most competitive rates.

More information for institutional clients is available in this article.

Brought to you by OVEX.

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