Web3 Neobank Canza Finance Secures $2.3M to Scale Baki, Its Low-Cost African Forex Platform

Polychain Capital just led a $2.3 million (KES 316.1M | NGN 3.41B | ZAR 38.8M) funding round for Canza Finance alongside Protocol Labs, Avalanche’s Blizzard Fund, 99 Capital, Stratified Capital, and others.

TL;DR,

• Web3 Neobank Canza Finance raised $2.3 million as it scales Baki, a synthetic FX DeFi platform using USDC-collateralized zTokens to lower cross-border payment costs for African SMEs.

• Canza is positioning itself as a compliance-forward Web3 neobank for African SMEs, combining KYC/KYB onboarding with on-chain synthetic FX swaps to speed up and cheapen international payments.

• Baki replaces traditional FX liquidity pools with over-collateralized synthetic stablecoins and oracle-based rates, promising efficiency, but introducing smart-contract, collateral, and regulatory risks users must understand.

The Nigerian-based Web3 neobank has attracted growing institutional confidence and now targets regulatory licenses across three jurisdictions, while scaling Baki, its synthetic forex DeFi platform designed to slash cross-border payment costs for African SMEs from roughly 1% to as low as 0.2%.

The Web3 neobank has raised a total of $5.5–5.75 million since its 2020 founding, driven by its focus on solving Sub-Saharan Africa’s remittance costs, averaging 7.9%, the highest globally, yet we have some of the weakest currencies.

What are Canza Finance and the Baki FX DeFi Platform?

Founded in 2020 by CEO Pascal Ntsama IV and CTO Oyedeji Oluwoye, Canza Finance has rightful claims to its Web3 Neobank title. The organization mainly focuses on cross-border payments and forex access for small and medium enterprises (SMEs) in Africa.

Among its many features, we’ll dive into Baki, launched on November 2, 2023, on the Avalanche C-Chain blockchain.

Baki is described as the first synthetic DeFi market for African stablecoins—an infinite-liquidity forex protocol that enables slippage-free swaps between African currencies.

Rather than relying on traditional order books or liquidity pools, Baki uses synthetic stablecoins called zTokens (zNGN for Nigerian naira, zCFA for West African CFA franc, zZAR for South African rand, etc.), all collateralized by USDC.

Early in 2024, company reports said that Canza Finance was processing about $2 million in transactions a week across Nigeria, Cameroon, Senegal, and the United States, serving about 150 business clients. The platform reported more than 500,000 active users as of October 2023.

These figures essentially fueled the $2.3 million funding round from Polychain Capital.

Deep Technical Dive into the Baki FX DeFi Platform

The Baki FX DeFi platform provides a new perspective on access. The platform’s technical design is as follows:

1. Collateralization: Users deposit USDC as the sole collateral asset.
2. Minting zUSD: They mint zUSD, Baki’s synthetic dollar, at a minimum 150% collateralization ratio (for example, $150 USDC locks $100 zUSD).
3. Users can exchange zUSD for zTokens pegged to African currencies like zNGN, zCFA, and zZAR at central-bank reference rates provided by a Baki oracle.
4. Settlement: The protocol charges a 0.8% swap fee per trade, split between collateral providers, future CNZA token stakers, and a development wallet.

A local SME using Canza Finance generally must start by submitting KYC/KYB documentation and an invoice. Canza then determines the FX rate using the central-bank rate via the Baki oracle.

The local business then pays local currency to a vetted FX agent (often called “aboki” in Nigeria). Finally, the platform turns the fiat into stablecoins, does the swap on Baki if necessary, and pays the foreign supplier.

How Canza Finance reduces cross-border payment fees hinges on this architecture. The Web3 neobank inherently eliminates third-party intermediaries and uses over-collateralized synthetics instead of illiquid order books.

While the company’s goal is an audacious 0.2% effective fee for end users, the Baki FX DeFi platform levies a 0.8% swap fee on-chain, but the efficiency gains allow the front-end service to remain dirt cheap.

The 0.2% Target Fee: A DeFi Solution for African SMEs

Retail trading is often the driving force behind crypto evangelism. Canza Finance does something a bit different: DeFi for African SMEs. In 2023, remittance inflows to Sub-Saharan Africa totaled $54 billion, yet costs remain stubbornly high.

The World Bank reports an average of 7.9% to send $200 to the region, compared to a global average of 6.4%. Banks are even pricier, averaging roughly 12%.

Stablecoins have become a known favorite for many local businesses and retail traders. It’s a hedge against inflation, a value retention strategy, and a yield-bearing option for most.

Hence, for DeFi for African SMEs, a Web3 neobank is the solution to bypass local liquidity crunches by using global stablecoin liquidity.

African traders are estimated to pay roughly $25 billion annually in cross-border payment fees, according to the African Continental Free Trade Area (AfCFTA) and IOTA’s ADAPT initiative.

Canza Finance’s bet is that a licensed, transparent, blockchain-native Web3 neobank can capture a meaningful share of this flow by offering SMEs the speed and transparency of DeFi with the compliance and fiat on-ramps they require.

CHECK OUT: Base by Coinbase: Accelerate dApps and Stablecoin Remittances in Africa

Licensing Strategy: Three Jurisdictions, Three Regulatory Hurdles

According to CEO Pascal Ntsama, the $2.3 million will mainly fund license applications in three jurisdictions:

• Money Services Business (MSB) license in the United States (via FinCEN registration and state-level compliance).
• In Nigeria, you need a Foreign Exchange (FX) license, which is probably a Bureau de Change or an authorized dealer under the Central Bank of Nigeria.
• The Financial Services Commission of Mauritius has three virtual asset licenses. These are probably a mix of Class M broker-dealer, Class R custodian, and Class S marketplace licenses under the VAITOS Act 2021.

Reports from March 2024 say that Canza is “in the process” of getting these licenses. However, people who might want to use them should check the current status of these approvals, as the rules in Nigeria and the US are still changing.

What This Means for African SMEs: Evaluating Cross-Border Solutions

A Web3 neobank usually means the following for any business in Lagos, Nairobi, or Dakar:

• Cost savings: Moving from a regular bank (which charges 7–12% fees) to a stablecoin-based rail can save you hundreds or even thousands of dollars on each transaction.
• Speed: Settlement within 24 hours is significantly faster than multi-day SWIFT transfers.

However, it does have its risks. For instance, Baki protocol relies on collateral. If the value of the collateral drops significantly, or if the peg is tested, positions can be liquidated.

Users of the DeFi protocol must understand the mechanics of over-collateralization (min 150%).

Ambition Meets Execution Risk

The $2.3 million raise for Canza Finance and the launch of the Baki FX DeFi platform show that Africa is becoming a more innovative and useful place to live.

The surge of startups leveraging blockchain has soared, with many focusing on solving issues like financial inclusion and cross-border payment and even diving into other sectors. This Web3 neobank has shown that its products work well in the market at a small scale.