How could South Africa spearhead crypto adoption in Africa?

Crypto popularity in South Africa

South Africa has shown itself in multiple crypto headlines over the past couple of years. No matter if it was due to some kind of local scheme being busted, or a new crypto company being founded, South Africa always seems to be in the center of attention when it comes to anything related to cryptocurrencies or finance in general.

In fact, this African country which has been doing great over the course of the last few decades in terms of economic stability is often referred to as the centerpiece of blockchain implementation on the African continent.

But things aren’t that easy, as every country is independent and makes its own choice here. Several of them have already introduced a ban on cryptocurrencies completely, while others like South Africa are embracing the technology for future potential.

But what exactly indicates the possibility of a blockchain-heavy South Africa? What are the hints that the country’s economic growth and future tell us about a potential crypto haven?

Let’s find that out.

Financial literacy and investment culture

The first thing we need to focus on is the financial literacy of the South African nation. It’s very hard to measure it considering how you can’t really make the whole nation write a test about it, but it’s pretty obvious through the rampaging investment culture that South Africa is currently embroiled in.

What is the investment culture? It’s the undeniable desire of the nation’s population to increase their wealth through smart investment, be it in the financial markets or tangible physical ventures.

Numbers from the 2018 economic report shows that almost all investments have been decreasing, including FDI, but private equity is at an all-time high. Why? Because South Africans like to speculate on financial markets, which isn’t necessarily classified as an investment.

Investment is mostly referring to company stock or real estate, while the financial markets of currencies, as well as for cryptocurrencies, is usually classified as either speculation or hobbyist activities.

How the culture was popularized

Having distinct connections with several financial hubs in the world such as the United Kingdom and the Netherlands, the art of financial speculation was always popular in South Africa, but not necessarily with its African population.

The popularization of this investment culture happened when dozens of young adults started to risk their already dwindling funds in the markets and walking away with millions.

This was easy to do in the past as the nation’s currency was quickly depreciating against the USD, which was a perfect time for speculation even on currently banned assets.

Those who managed to make a fortune through their speculation, founded institutes and schools where they dedicated their years of experience to their students, thus producing even more successful traders, thus more influencers in terms of finances.

However, the popularization of cryptocurrencies happened sometime in 2017, after the market blew up.

The impact of 2017 on South African traders

Before 2017, cryptocurrencies were known to only a select few of South African investors. But, thanks to those few investors that had the foresight to invest in things like Bitcoin, Litecoin and Ethereum way back in 2016, the popularization of cryptos after the 2017 boom was completely natural.

Unfortunately, though, cryptocurrencies got popular for the wrong reasons. Most of the traders were perceiving them as “get rich quick” methods rather than long-term investments that they’ve turned into nowadays.

Because of that, multiple South African traders, flabbergasted by the success of their peers who invested before 2017, poured in thousands of dollars of hard-earned funds in 2018, right as the crypto winter hit.

Needless to say, almost all of the investors that dedicated funds to cryptos during those times are now staunch opposers of the technology. But thankfully, they’re completely outnumbered by crypto supporters.

The importance of crypto literacy

Once cryptocurrencies manged to gain enough fame in the South African community for the government to take note of it, it was immediately assigned as a task to the local financial regulator to dish out advice and education for these people.

In the past, South African Forex brokers had the “monopoly” of having free education being delivered by the Financial Services Conduct Authority directly to the South African community, but now they were being challenged by this upstart new industry.

Due to such an “intervention” Forex brokerages, that covered nearly 90% of all investment market share in the country started to add things such as cryptocurrency CFDs on their platforms, further popularizing the assets.

Those who had decided to remain on Forex markets finally had the chance to “try out” the new currencies and see if they were worth the risk. Thankfully, they quickly found out that these currencies were much more volatile than the traditional EUR/USD pair and others.

It immediately became a booming market segment for Forex brokers, to a point where the government had to somehow intervene.

What was the intervention?

The intervention was facilitated by the extremely fast-growing list of South African Forex brokers, many of which were not licensed by the local authority, or were simply fraudulent companies hoping to grab a bite of the booming market.

This was stopped by drafting the first “cryptocurrency regulation” bill, which would simply require companies willing to offer these assets to register with the FSCA or the national bank.

This way, the government was sending direct messages to their population that any company that doesn’t hold the license is immediately classified as either fraudulent or unworthy of a trader’s attention.

What did this history produce?

Describing the history was essential to understand the current state of affairs with cryptocurrencies in South Africa.

The currencies have the benefit of immense popularity according to studies done in the region. The only countries to even come close to the popularity levels of cryptos in SA are Nigeria and Kenya.

This can be understood through not only Google trends for the search volumes, but also a study was done on the percentage of crypto owners in internet users in the countries, which South African managed to top.

Currently, there are dozens of South African crypto companies servicing the local population with their investment portfolios. And due to uncertain laws in neighboring countries, a large majority of the African population relies on South African companies to have access to the markets.

It’s unlikely for the regulations to tighten at any point in the future, thus giving foreign companies a great incentive to set up shop there.

The labor costs are much lower than any other potential country they could opt for, and the tax on cryptos alongside revenue is virtually non-existent.

Therefore, with this much information compiled in one single article, it’s easy to understand why it is South Africa who has the most potential for spearheading crypto adoption on the African continent.


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