In numerous African regions, the scarcity of foreign exchange liquidity and limited access to currency swaps pose challenges, especially in import-dependent economies, restricting the availability of U.S. dollar services. Pascal Ntsama IV, CEO of Canza Finance, highlighted this issue, emphasizing that decentralized finance (DeFi) could potentially bridge this gap by leveraging cryptocurrencies, blockchain networks, and related services.
Ntsama, the CEO and co-founder of Canza Finance, introduced Baki, a new DeFi technology aiming to decentralize African currencies by facilitating slippage-free swaps based on central bank rates. Baki strives to establish a platform enabling businesses to engage in intra-African and foreign exchange transactions at reduced costs, addressing the challenge of funds flowing out of Africa during conversions into local African fiat currencies, consequently elevating the value of the dollar and incurring currency slippage costs.
This innovative approach aims to alleviate these issues by allowing traders to exchange currencies without incurring losses and to transact at official central bank prices. Projections suggest that DeFi in Africa will grow annually at 21.99%, expecting to surpass 500,000 users by 2027. However, some industry experts believe these forecasts might need revising, considering the evolving landscape of grassroots adoption of blockchain products.
When discussing the applicability of Baki's services in countries like Nigeria, where blockchain technology adoption is not yet widespread despite regulatory approval, Ntsama highlighted the adaptability of Baki to the existing regulatory environment. He emphasized that Baki harnesses existing user behavior to navigate blockchain technology challenges, indicating that favorable regulatory changes would encourage broader industry and institutional adoption.
Ntsama further explained that in conventional FX swaps, agents assume local currency risks until they recover the position, necessitating risk pricing for the buyer. However, Baki aims to mitigate these risks by enabling exchanges between similar currencies at official exchange rates, minimizing slippage when entering a USD position.
Regarding revenue generation, users and entities providing liquidity to Baki can earn profits through an 80 basis point fee per currency swap within the system. This revenue will be distributed, with 50% going to liquidity providers, 25% to Canza Finance's native token holders, and the remaining 25% allocated to Canza Finance itself.
