A Legal Proposal on Modernizing African Trade Payments

African exporters face significant challenges in cross-border transactions, including high banking fees, delayed settlements, and currency volatility. For those trading with U.S. buyers, these obstacles can cut deeply into profit margins and impede growth.

Two emerging financial tools—Stablecoins and the Pan-African Payment and Settlement System (PAPSS)—offer a potential solution. Used together, they can reduce transaction costs, speed up settlements, and expand access to international markets. But they also present important legal and regulatory considerations that exporters and their counsel must navigate carefully.

Understanding the Tools

PAPSS

Developed by Afreximbank in collaboration with the African Union, PAPSS allows cross-border payments in African local currencies. This reduces reliance on foreign correspondent banks, cutting fees and delays. It also aligns with the African Continental Free Trade Area (AfCFTA) goals of boosting intra-African trade.

Stablecoins

Stablecoins like Tether (USDT) are cryptocurrencies pegged to stable fiat currencies, typically the U.S. dollar. They allow instant, low-cost international transfers over blockchain networks, bypassing traditional banking rails. For African exporters, this means faster settlements and access to dollar-equivalent value without expensive conversions.

How They Work Together

When combined, Stablecoins and PAPSS create a hybrid settlement model:

Negotiate in USDT with a foreign buyer (locking in dollar value).
Receive funds in a crypto wallet quickly and with minimal fees.
Convert part of the USDT into local currency via licensed exchanges or OTC agents.
Use PAPSS to pay regional suppliers, settle obligations, and facilitate intra-African trade.

This approach gives exporters speed, cost savings, and flexibility while supporting regional economic integration.

Legal and Regulatory Considerations

While promising, these tools require careful legal structuring.

Regulatory Compliance: Exporters must ensure compliance with local and international foreign exchange controls, anti-money laundering (AML) laws, and sanctions regulations.
Stablecoin Risks: Questions remain about reserve transparency, depegging risks, and potential regulatory changes in major jurisdictions.
Tax Implications: Converting Stablecoins into local currency or retaining them for future use can trigger tax and reporting obligations.
Contractual Safeguards: Agreements with foreign buyers should address volatility, settlement timing, and dispute resolution mechanisms, especially when using non-traditional payment channels.

Why This Matters

For African exporters, combining Stablecoins with PAPSS could mean:

Settlements in minutes instead of days
Lower FX exposure and conversion costs
Improved cash flow and competitiveness in global trade

But without proper legal oversight, the same strategy could expose exporters to sanctions violations, compliance penalties, or unenforceable contracts.

Conclusion

Stablecoins and PAPSS are not just payment innovations, they present legal challenges and opportunities.

By adopting a hybrid payment strategy, African exporters can modernize their trade operations and gain an edge in a rapidly evolving market. However, doing so requires proactive legal planning to navigate regulatory complexities, manage risks, and ensure enforceable trade agreements.

The Whittier Law Group advises exporters, importers, and trade facilitators on how to implement these tools safely and compliantly.

Interested in exploring how Stablecoins and PAPSS could work for your business? Contact us to discuss your options.