Every few months, a new paper arrives from a central bank, a development finance institution, or a technology think tank announcing that Africa's financial inclusion problem will be solved by a central bank digital currency. The CBDC is coming. The CBDC will bank the unbanked. The CBDC will eliminate remittance fees. The CBDC will — the papers imply — do essentially everything that mobile money hasn't quite done, minus the private intermediary.
I want to be careful here. I am not opposed to CBDCs as a concept. Some of the people building them are doing rigorous, important work. But I think the CBDC conversation is drawing attention away from a more immediate, more tractable, and more transformative opportunity: building stablecoin-native payment rails that work for African utilities, cooperatives, and community institutions right now, without waiting for regulatory frameworks that will take years to mature.
This is the problem PesaRails is trying to solve. And it starts with being honest about what the legacy financial system is actually doing to African money.
Same transfer, same two endpoints — one rail taxes it on the way through.
1. Why this is an infrastructure claim, not a forecast
This paper argues for a specific infrastructure choice — stablecoin-native payment rails for African institutions, ahead of and separate from the CBDC question. What follows states precisely what kind of claim that is.
What it argues from. The World Bank's own published remittance-cost data for the region.1 Published, institutional research on stablecoin risk and regulation from the Bank for International Settlements.23 A documented account of what happened when an algorithmic stablecoin failed (TerraUSD, May 2022) and of a reserve-backed stablecoin's own real governance failure (Tether's 2021 New York settlement).45 Africa's one published, substantial case study of a retail CBDC in its first year (Nigeria's eNaira).6 Direct field observation of one water utility and one SACCO, described by a treasurer in Flux's own fieldwork.
What it does not argue from. No controlled comparison exists of settlement cost or operational friction for African institutions actually using stablecoin rails against their current multi-system setup — none was found, and PesaRails itself does not yet have outcome data to offer. No independent audit of PesaRails' own claims exists. The remittance-corridor table in §2 carries only the figures that could be independently corroborated; a specific per-corridor breakdown beyond that (certain West African or Horn of Africa corridors, for instance) was not found sourced and is not included.
What it does not claim. It does not claim stablecoins are risk-free; §6 engages both an algorithmic stablecoin's collapse and a reserve-backed stablecoin's own reserve-transparency failure directly. It does not claim CBDCs cannot work; Nigeria's eNaira is one country's one retail-focused design, and §6 is explicit that its disappointing first year is not proof against a differently designed CBDC, or against the institutional use case this paper is actually about. It does not claim remittance costs are uniformly high across every corridor into Africa; the US-Nigeria corridor, discussed in §2, is a sharp counterexample this paper does not paper over.
What would refute it. Given in full in §9. The sharpest version: if African institutions that adopt stablecoin rails show no measurable reduction in settlement cost or friction relative to their current multi-system arrangement, the central practical claim of this paper fails regardless of how sound the theoretical argument sounds.
2. The Remittance Tax, Re-Examined
When someone in the UK sends £200 to their family in Nairobi, published data puts the cost of sending money into Sub-Saharan Africa well above the global average. In the World Bank's most recent published quarterly data (Q1 2025), the average cost of sending $200 to Sub-Saharan Africa was 8.78% of the transfer value, against a 6.49% global average — the most expensive region in the world to send money to, by this measure.1
That regional average hides real variation, and I want to show the variation rather than flatten it. The US-Nigeria corridor — Sub-Saharan Africa's largest single remittance corridor by volume — has been independently reported at closer to 2.94%, cheaper than the US-Mexico corridor and well below the regional average, driven by fintech competition on one of the continent's highest-volume routes.7 That is a real complication for any argument that frames the "African remittance tax" as a uniform 7-12% toll: on the corridor that moves the most money, competition has already pushed the price down close to what this paper argues stablecoin rails could achieve. The region's average is still the highest in the world, and most individual corridors into Africa are not as competitive as US-Nigeria — but the cost is not spread as evenly as a single "7% tax" figure suggests, and the per-corridor figures for UK-Kenya, France-Senegal, UAE-Ethiopia, and intra-East-Africa are left out here because they could not be independently confirmed.
These fees are not a technical inevitability, where they are high. They are a rent extracted by the infrastructure layer. The question is not whether the infrastructure can be replaced — it clearly can, and on at least one major corridor it already has been, in part — but whether the replacement serves the actual institutions that need it, and not only the highest-volume consumer corridors competition reaches first.
The cost that remains, where it remains, is largely the cost of a financial infrastructure built for a different world — one in which cross-border value transfer required physical correspondent relationships, manual clearing, and human intermediaries at each step. SWIFT was founded in 1973.8 The architecture of international payments reflects the technology and geopolitics of that era. It has been iterated and patched, but its fundamental structure has not changed, and most corridors into Africa have not yet seen the fintech competition that brought the US-Nigeria corridor down.
What has changed, in the last several years, is that an alternative exists. Dollar-denominated stablecoins — USDC, USDT — can be sent from a wallet in London to a wallet in Nairobi in a matter of minutes, and industry reporting puts the network cost at a small fraction of a percent to a few dollars depending on the blockchain used — an order-of-magnitude claim, not an audited rate, and one this paper has not independently verified against a primary benchmarking study.9 The transfer is settled on-chain, cryptographically verified, and final. There is no correspondent bank. There is no foreign exchange desk waiting to clip the spread. There is no three-day clearing cycle. Whether that order-of-magnitude cost advantage holds up for the specific, institutional use case this paper is actually about — not individual remittances, but utility and cooperative treasury operations — is a separate question from the remittance-corridor evidence above, and §9 states it as a falsification condition rather than an assumption.
3. What This Has to Do with Water Utilities
The stablecoin remittance use case gets most of the attention. But I am more interested in a different application — one that is less visible but more structurally important: using stablecoin rails to build payment and financial infrastructure for African community-scale institutions.
Consider a water utility in Kisumu. It collects payments from 80,000 customers, mostly via M-Pesa. It pays its field contractors. It repays a loan from a development finance institution denominated in euros. It reports to a county government and a national regulator. Each of these financial flows runs through a different system — M-Pesa for customer collections, a bank for contractor payments, a SWIFT transfer for the DFI loan repayment, a separate accounting system for regulatory reporting. The friction at each interface costs the utility money, time, and operational visibility.
Now consider a SACCO with 2,000 members across three counties. It collects member contributions in cash and M-Pesa. It disburses loans. It needs to report loan performance to a regulatory body. It would like to access working capital from an impact investor based in Amsterdam. Every one of these flows is slower, more expensive, and less visible than it needs to be — not because the SACCO is doing anything wrong, but because the financial infrastructure it is operating on was not designed for it.
I can tell you exactly how many loans we have outstanding and which members are in arrears. What I cannot tell you is what our liquidity looks like in real time, because the money is in three different places and reconciling them takes my accountant two days a month.
— SACCO treasurer, Western Kenya
Stablecoin rails don't solve all of this. But they solve the settlement layer — and the settlement layer is where a surprising amount of the friction lives, on the account above. If a water utility could receive payment from a DFI, settle contractor invoices, and hold working capital in a stablecoin-denominated account while waiting to be disbursed, the number of intermediaries it is paying — and the number of systems it is reconciling across — plausibly drops. Whether it actually does, measured, for institutions like these two, is exactly what §9 flags as not yet tested.
4. The Infrastructure Problem the CBDC Debate Ignores
Here is what the CBDC debate mostly ignores: the institutions that most need financial infrastructure reform in Africa are not individuals. They are organizations — utilities, cooperatives, constituency offices, hospitals, community development funds. And the financial infrastructure these organizations need is not primarily consumer payments. It is treasury management, cross-border settlement, working capital access, and regulatory reporting.
CBDCs, as currently conceived and as deployed in Africa's one substantial case so far, are primarily designed for retail payment use cases — replacing cash, enabling person-to-person transfers, maybe bridging to formal banking. Nigeria launched the eNaira in October 2021 as the continent's first CBDC. A year in, the IMF's own published review found wallet downloads had reached roughly 860,000, onboarded clients remained under 1% of active bank accounts, and 98.5% of wallets went unused in any given week — "disappointingly low" adoption, in the report's own language.6 This is one country's one design choice — a retail-focused CBDC competing against an already-dominant mobile-money ecosystem — not proof that central bank digital currency as a category cannot serve institutional treasury needs. But it is real, published evidence that the retail-CBDC promise this paper opened by describing has not, in Africa's one substantial test so far, delivered the transformation its boosters predicted.
The distinction matters: retail payments need ubiquity and simplicity. Institutional finance needs programmability, composability, and auditability. These are different engineering problems — and eNaira's struggles, on the evidence above, are specifically retail-adoption struggles, which is a different failure mode from "institutional treasury infrastructure doesn't need this."
What institutional finance needs is programmable money — value that can be released automatically when conditions are met, transferred across borders in minutes, audited on-chain, and integrated into the operational software the institution is already using. This is what stablecoin infrastructure can plausibly provide, and what retail-focused CBDCs like Nigeria's are not designed to provide. Whether a differently designed, institution-focused CBDC could provide it instead is a live question this paper does not foreclose; §6 takes it up directly.
5. What PesaRails Is
PesaRails is Flux's attempt to build the stablecoin-native financial infrastructure layer that African community-scale institutions actually need. Not a consumer payment app. Not another M-Pesa aggregator. A financial operations platform intended to let a water utility, SACCO, or cooperative:
Hold and manage value in stablecoin-denominated accounts alongside local currency accounts. Receive international payments from development finance institutions, impact investors, or diaspora donors at a fraction of the typical correspondent-banking cost. Disburse payments to contractors and staff with on-chain auditability. Access working capital from liquidity providers who can extend capital against on-chain proof of cash flows. Generate regulatory reports that are automatically reconciled against on-chain transaction records.
These capabilities are Flux's own stated design intent for the product, not independently measured outcomes. The underlying components — stablecoins, on-chain settlement, programmable transfers — exist and are in wide use elsewhere. What has not been built, and what Flux is building, is the institutional layer: the compliance framework, the account structure, the integration with the existing operational software African institutions use, and the interfaces that work for a treasurer in Kisumu who has never touched a blockchain wallet.
That translation work is what we are doing. Kill the fees. Keep the money. Build the rails that African institutions actually deserve.
6. Objections I take seriously
"Flux has a commercial interest in this conclusion." Flux builds PesaRails, and this paper's central argument — that stablecoin rails, not CBDCs, are the near-term answer for African institutional finance — is close to PesaRails' own sales pitch. I am not going to pretend otherwise. The honest mitigation is narrow: the remittance-cost evidence in §2 and the eNaira evidence in §4 are both independent of Flux, produced respectively by the World Bank and the IMF, and would show the same patterns whether or not Flux or PesaRails existed. What is not independent is this paper's leap from "stablecoin rails could plausibly solve the settlement-layer friction described in §3" to "PesaRails is the product that does this well" — that claim rests on Flux's own, unaudited account of its own product.
"Stablecoins are not risk-free." This is a serious objection and deserves a precise answer rather than a dismissal. In May 2022, the algorithmic stablecoin TerraUSD (UST) lost its dollar peg and collapsed within days — from roughly $0.985 to $0.22, as the token supply of its sister asset LUNA exploded from 0.4 billion to 32 billion within 48 hours, destroying tens of billions of dollars of value.4 That failure was specific to UST's design: it was backed by an algorithm and a sister token, not by off-chain reserve assets, a distinction the economic literature on the collapse is explicit about.4 Reserve-backed stablecoins — the kind PesaRails would actually use — have their own, different risk history: in February 2021, the New York Attorney General found that Tether's long-standing claim to be fully backed by US dollars "at all times was a lie," extracting an $18.5 million penalty and an ongoing quarterly reserve-reporting requirement.5 Neither risk is hypothetical, and neither is resolved by this paper. A reserve-backed stablecoin can still misrepresent its reserves; its issuer can still fail; and an institution holding working capital in one is exposed to that issuer's solvency and honesty in a way it would not be exposed to a bank balance covered by deposit insurance. §9 names this directly as a falsification condition, not a footnote.
"Stablecoins undermine the 'singleness of money' that makes a currency useful as a unit of account." The Bank for International Settlements has made this argument directly: because stablecoin holdings are tagged with their issuer's name, they can trade at varying exchange rates against one another and against the currency they claim to track — "much like private banknotes circulating in the 19th century Free Banking era in the United States."2 A BIS working paper goes further, explicitly questioning whether stablecoins solve problems that well-designed CBDCs or fast payment systems could not solve just as well, with less fragmentation risk.3 This is a genuine, institution-level critique from a credible, independent source — the kind of authority this paper cannot simply out-argue. My response is narrower than a rebuttal: for the specific institutional use case in §3 (settlement between a small number of known counterparties — a utility, a DFI, a contractor — rather than broad retail circulation), the fragmentation risk BIS is describing is smaller than it would be for a stablecoin circulating as everyday consumer money. That is a scoping argument, not a refutation, and it does not make the underlying BIS critique wrong for the uses it is actually about.
"Nigeria's eNaira failure doesn't tell us much about whether a CBDC could serve institutional treasury needs." Correct, and §4 says so directly. The eNaira is one country's one retail-focused design, competing against an already-entrenched mobile-money ecosystem; its struggles are specifically retail-adoption struggles. A CBDC purpose-built for institutional settlement — rather than retail circulation — might face a completely different set of obstacles, or none of these particular ones. This paper's argument does not depend on CBDCs being incapable in general; it depends on the actually-existing CBDC conversation being retail-focused while this paper's problem is institutional, and on stablecoin rails being available now, which is a timing argument as much as a technical one.
"Regulatory risk for institutional stablecoin custody in Kenya and East Africa is genuinely unclear." I looked for a clear statement of Kenya or East African regulatory policy on non-retail, institutional stablecoin custody specifically — as opposed to retail cryptocurrency trading, which is more commonly addressed — and did not find one. A water utility or SACCO holding working capital in a stablecoin account is operating in a regulatory position this paper cannot describe with confidence, and §9 names a shift toward restriction as one of the sharpest things that could falsify the practical case for this paper's proposed path.
7. The risks this paper does not explain away
Stablecoins are not risk-free. §6 engages both an algorithmic stablecoin's collapse (Terra/UST) and a reserve-backed stablecoin's own reserve-misrepresentation history (Tether) directly, as real and unresolved.
It does not claim CBDCs cannot serve institutional needs; Nigeria's eNaira is one country's one retail-focused design, and §4 and §6 are explicit that its weak first year is not proof against a differently designed, institution-focused CBDC.
It does not claim remittance costs are uniformly high across every African corridor; the US-Nigeria corridor in §2 is a documented, sharp counterexample this paper does not hide.
It does not claim a measured cost or friction reduction for African institutions actually using stablecoin rails; no such comparison was found, and PesaRails does not yet have outcome data of its own to offer.
It does not claim Kenya or East Africa's regulatory treatment of institutional stablecoin custody is settled or favourable; §6 states plainly that it was not found clearly stated anywhere.
And it does not claim the BIS's "singleness of money" critique of stablecoins is wrong; §6's response narrows the claim to a specific institutional use case rather than refuting the broader critique.
8. [reserved]
(Section intentionally renumbered — see §9 for falsification conditions and the appendices for the evidence table and citation register.)
9. What would falsify this
Stated as commitments, in decreasing order of how much damage each would do to this paper's claims.
African institutions that adopt stablecoin rails show no measurable reduction in settlement cost or operational friction relative to their prior multi-system arrangement, once measured. That would directly contradict the central practical claim of this paper, regardless of how sound the theoretical argument in §§2-4 sounds, and the right response would be withdrawal, not a softer version of the same claim.
A reserve-backed stablecoin central to this paper's proposed infrastructure (such as USDC) suffers a reserve shortfall, redemption freeze, or issuer failure comparable in kind to Tether's 2021 reserve-misrepresentation finding or, worse, to Terra/UST's 2022 collapse. That would be the sharpest practical vindication of the "not risk-free" objection in §6, and would require this paper's institutional-infrastructure proposal to be substantially reconsidered, not merely caveated further.
Kenyan or East African regulators move to restrict or prohibit institutional, non-retail stablecoin custody for public-adjacent bodies such as water utilities and SACCOs. That would foreclose the proposed path regardless of its technical merit, and is a live possibility this paper cannot currently rule out, since it could not find the relevant regulatory position clearly stated.
A next-generation, institution-focused CBDC design (unlike Nigeria's retail-focused eNaira) demonstrates it can serve programmable, auditable institutional treasury use cases as well as or better than stablecoin rails. That would weaken this paper's central CBDC-versus-stablecoin distinction substantially, though it would not retroactively make the remittance-cost or eNaira-adoption evidence in §§2 and 4 false.
Appendix A — Evidence table
| # | Claim used in this paper | Value / finding | Source |
|---|---|---|---|
| 1 | Average cost of sending $200 to Sub-Saharan Africa, Q1 2025 | 8.78%, vs. 6.49% global average | World Bank, Remittance Prices Worldwide1 |
| 2 | US-Nigeria remittance corridor cost (Sub-Saharan Africa's largest by volume) | ≈2.94% — well below the regional average | Independently corroborated secondary reporting7 |
| 3 | SWIFT founding | 1973 | Historical record8 |
| 4 | Stablecoin network transfer cost and settlement speed | A small fraction of a percent to a few dollars; minutes — order-of-magnitude, not an audited rate | Industry reporting, not independently benchmarked9 |
| 5 | TerraUSD (UST) collapse, May 2022 | Fell from ≈$0.985 to $0.22 in days; LUNA supply 0.4bn→32bn in 48 hours; algorithmic design, not reserve-backed | Wong 2022, Federal Reserve Bank of Richmond4 |
| 6 | Tether reserve-backing claims found false by NY Attorney General | $18.5M penalty; ongoing quarterly reserve reporting imposed, Feb 2021 | NYAG press release5 |
| 7 | Stablecoins can trade at varying rates against their peg due to issuer-specific risk ("singleness of money" problem) | Compared to 19th-century US free-banking private banknotes | BIS Annual Economic Report 2025, Ch. III2 |
| 8 | Whether stablecoins solve problems better than well-designed CBDCs or fast payment systems | Explicitly questioned, not settled | Arner, Auer & Frost 2020, BIS WP 9053 |
| 9 | Nigeria's eNaira (Africa's first CBDC) adoption, one year on | ≈860,000 wallet downloads; <1% of active bank accounts onboarded; 98.5% of wallets unused weekly | Ree 2023, IMF WP 2023/1046 |
| 10 | PesaRails product capabilities and claims | Internal, unaudited design intent | Flux internal data |
| 11 | Measured settlement-cost or friction reduction for African institutions (utilities, SACCOs) actually using stablecoin rails | — | — |
| 12 | Kenya/East Africa regulatory status for institutional, non-retail stablecoin custody by public-adjacent bodies | — | — |
| 13 | Verified per-corridor remittance costs beyond rows 1-2 (e.g. UK-Kenya, France-Senegal, UAE-Ethiopia, intra-East-Africa) | — | — |
Appendix B — Citation register
CITATION-NEEDED — measured outcome data for African institutions on stablecoin rails. Appendix A row 11. No study or audited case was found measuring actual settlement-cost or friction reduction for a water utility, SACCO, or similar institution using stablecoin rails; this paper's core practical claim rests on inference from the settlement-layer architecture, not a measured result.
CITATION-NEEDED — Kenya/East Africa regulatory status for institutional stablecoin custody. Appendix A row 12. A clear statement of policy for non-retail, institutional use (as opposed to retail cryptocurrency trading) was not found.
CITATION-NEEDED — verified corridor-level remittance costs beyond rows 1-2. Appendix A row 13. Earlier versions of this paper carried specific percentages for several corridors that could not be re-verified in this pass; they have been removed rather than carried forward unchecked.
World Bank, Remittance Prices Worldwide, Q1 2025 data. The primary PDF (remittanceprices.worldbank.org) was behind a Cloudflare challenge that blocked automated fetching in this pass; the Q1 2025 figures (8.78% Sub-Saharan Africa average, 6.49% global average) were corroborated across the World Bank's own blog and multiple independent secondary reports rather than read from the primary document directly.↩
Bank for International Settlements, BIS Annual Economic Report 2025, Chapter III, "The next-generation monetary and financial system" (Basel: BIS, June 2025). Fetched and read directly.↩
Douglas Arner, Raphael Auer, and Jon Frost, "Stablecoins: risks, potential and regulation," BIS Working Paper No. 905 (Basel: Bank for International Settlements, November 2020). Fetched and read directly.↩
Russell Wong, "Why Stablecoins Fail: An Economist's Post-Mortem on Terra," Economic Brief No. 22-24 (Richmond, VA: Federal Reserve Bank of Richmond, July 2022). Fetched and read directly.↩
Office of the New York State Attorney General, press release, "Attorney General James Ends Virtual Currency Trading Platform Bitfinex's Illegal Activities in New York" (23 February 2021), ag.ny.gov. Fetched and read directly.↩
Jookyung Ree, "Nigeria's eNaira, One Year After," IMF Working Paper No. 2023/104 (Washington, DC: International Monetary Fund, May 2023). The IMF's own page returned an access error in this pass; findings confirmed via corroborating secondary reporting (Ledger Insights) cross-checked against independent bibliographic listings of the paper.↩
Independently reported figure for the US-Nigeria remittance corridor, sourced via secondary reporting rather than a primary World Bank table in this pass (see note 1 on the primary PDF's access restriction).↩
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) was founded in 1973.↩
Industry reporting on stablecoin network transaction costs and settlement times (various blockchain-payments industry sources, 2025-2026); not independently benchmarked against a primary or peer-reviewed study in this pass, and treated throughout this paper as an order-of-magnitude claim rather than a verified rate.↩
