The inaccessibility of forex liquidity and currency swaps in Africa restricts the usage of USD-based services across the continent’s import-dependent economies. According to Pascal Ntsama IV, CEO of Canza Finance, this leaves a void that decentralized finance (DeFi) might fill by utilizing cryptocurrencies, blockchain networks, and services.
Canza’s new DeFi technology, Baki, aims to address this challenge by providing decentralized foreign exchange (FX) for African currencies, enabling slippage-free swaps at central bank rates, according to the CEO and co-founder of Canza Finance, a neobank that facilitates decentralized cross-border payments for Africans, in an interview with Cointelegraph. Additionally, it aims to establish a hub where companies may engage in FX and intra-African trades at a discounted rate.
Money leaves Africa when local African fiat currencies are exchanged, which increases prices because of currency slippages and causes inflation in the value of the dollar. In order to combat this, Baki allows dealers to exchange currencies at official central bank rates without suffering a loss.
By 2027, DeFi users in Africa are expected to exceed half a million, with an estimated annual growth rate of 21.99%. Industry insiders, however, have argued that these estimates should be revised given the ongoing record highs being reached by grassroots adoption of blockchain technologies.
When asked if Baki’s services would be effective in nations like Nigeria, where blockchain technology has not yet been widely embraced despite approval, Ntsama responded that Baki is designed to function within the current regulatory environment because it makes use of user behaviors already in place to address blockchain-related issues. He insisted that Baki would be more widely adopted by industry and institutions if regulations were to change in a favorable way.
According to Ntsama, the buyer must be priced for the local currency risk because the agency bears it until the position can be recycled. By exchanging comparable currencies at the official rate, Baki lowers these risks and makes it possible for the agent to swap again with less slippage when taking up positions in US dollars.
Ntsama claims that users and organizations that supply Baki with liquidity benefit from the 80 basis point fee that is assessed on each currency swap that occurs within the system. 50% of this yield goes to the liquidity providers, 25% goes to the native token holders of Canza Finance, and 25% goes to Canza Finance.