Over a decade ago, in 2014, the South African Reserve Bank (SARB), along with other financial institutions such as the Financial Services Board (now the Financial Sector Conduct Authority, FSCA) and the South African Revenue Service (SARS), issued its first official statement regarding cryptocurrencies. The main takeaway for the public was to remain cautious – highlighting that cryptocurrencies were neither regulated nor supervised by any of these authorities. A rise in popularity In the following years, exploration of blockchain technology’s potential began, and in 2016, the Intergovernmental Fintech Working Group (IFWG) was formed to analyse possible risks and opportunities. The crypto market grew rapidly, especially during the 2017 boom, which triggered a rise in interest among investors and regulators. With the increased popularity, fraud and illegal activities escalated, creating a strong need for regulation. This led the IFWG to publish a position paper on crypto assets, proposing that crypto service providers should be registered and subject to special regulatory rules. And in 2022, the Financial Sector Conduct Authority declared crypto a classified financial product. As a result, more South Africans are entering the crypto market with crypto brokers in South Africa becoming increasingly popular. A Growing Crypto Use Today, the cryptocurrency market continues to grow steadily, not only through private trading but also with the help of professional and institutional investments and improved technological payment solutions. One of the biggest drivers of adoption was the high transaction costs for payments in the traditional banking system. Many South Africans now use crypto to send and receive money internationally, especially since remittances from abroad are essential to the country’s economy. The historic volatility of the South African rand has also led many to view digital assets as an alternative for preserving value. “ We are seeing growing interest from institutional clients, particularly around custody solutions for digital assets, which will play a crucial role in supporting the crypto ecosystem here ,” said Rob Downes of Absa Group, one of South Africa’s largest banks. Implementation of Directive 9 However, as interest from institutions increases, so does regulatory pressure, and starting April 30th, stricter rules for crypto transactions will be implemented in South Africa. This will happen through a directive called “Directive 9.” A key part of this is the so-called “travel rule,” which requires proper customer information for domestic and cross-border crypto transactions. This information includes the sender’s full name, identity or passport number, date and place of birth, residential address, and wallet address for all transactions exceeding R5,000. This is a significant change in South Africa’s regulatory framework for crypto asset service providers (CASPs), who need to take immediate action to comply with these obligations. While these implementations aim to improve transparency and security, they also raise privacy concerns. The “travel rule” may require personal information to be transferred to countries with weaker data protection laws, potentially conflicting with South Africa’s Protection of Personal Information Act (Popia). Onshore or Offshore asset? Another issue in South Africa is that digital assets are not classified as either onshore or offshore. This makes crypto a legal gray area, unlike traditional assets, which are clearly categorised as onshore or offshore. This classification matters because offshore investments are capped for retail investors, while onshore assets have no such restrictions. Marius Reitz, Africa’s general manager at Luno exchange, a global cryptocurrency company, believes that this regulatory uncertainty is possibly slowing the sector’s growth. If regulators started classifying digital assets as onshore assets, this would probably further boost large-scale market growth. Future outlook: The Role of Crypto in South Africa’s Financial Future Throughout the 2020s, South Africa has become one of the global leaders in the DeFi sector and one of the top 20 crypto markets in the world, according to the Tech Trends in South Africa 2025 report. Numbers from Chainanalysis also show that the South African crypto market was valued at an astonishing $26 billion in 2023. Another survey – the Web3 and Crypto Perception Survey, conducted by leading blockchain and software company Consensys, also revealed that 42% of South Africans currently own or have previously bought cryptocurrencies, with Bitcoin being the most popular. Additionally, 47% of respondents see crypto as “the future of money.” With the convergence of regulatory evolution, technological breakthroughs, and expanding institutional support, South Africa is well-positioned to redefine its entire financial ecosystem. The coming years could witness a transformation in which digital assets become not just an alternative investment but a cornerstone of everyday economic life.
