South Africa has entered the digital currency arena with the launch of a new stablecoin, ZAR Universal (ZARU), pegged to the rand rather than the U.S. dollar, which dominates the global stablecoin market. The initiative aims to make the rand “internet-native,” but history suggests its appeal beyond South Africa may be limited.
ZARU is a collaboration among several South African companies, including crypto investment firm Luno, asset manager Sanlam Specialised Asset Management, investment platform EasyEquities, and fintech Lesaka. The stablecoin is deployed on the Solana blockchain and is positioned as an alternative to dominant currencies such as the dollar and the euro in digital finance.
The stablecoin is backed by rand-denominated assets, including South African government bonds. By keeping the reserve assets within the domestic financial system, the consortium aims to drive demand for rand-based assets.
For the moment, ZARU is available only to institutional investors via the Luno and EasyEquities trading desks. Both platforms have indicated that access for retail investors is planned for a later stage.
Little Advantage Outside of South Africa
One clear advantage of ZARU is its potential to simplify cross-border transactions for South African businesses. Using a rand-pegged stablecoin could reduce reliance on the U.S. dollar for settlement, potentially lowering costs and shortening transaction times.
Beyond these domestic use cases, however, prospects for wider international adoption appear uncertain.
“Other than a policy angle of offering something other than the U.S. dollar, which follows the larger macro trend of de-dollarization and de globalization, I don’t see other people or countries using it all that much due to lack of liquidity and potentially higher volatility exposure,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “This will be mainly used for South Africa-based transactions like imports and exports, and remittances.”
Euro-Backed Stablecoins Struggle
According to a report from the Brookings Institute, approximately 99% of stablecoins in use are pegged to the U.S. dollar. Even euro-denominated stablecoins, backed by a far more widely used currency than the rand, have struggled to find a market.
French bank Société Générale, for example, spent two years trying to launch a euro-backed stablecoin. After achieving circulation of roughly $47 million, the bank announced last June it would instead pursue a stablecoin pegged to the U.S. dollar.