How an African country accepted crypto wholeheartedly without resistance from myths, misconceptions and even skeptical government officials
- According to forex brokers operating in South Africa, the Rand is one of the world’s most traded currencies due to its high volatility tendencies
- SARB did achieve this goal as they finally and officially viewed crypto as a financial product, a field most countries are still trying to attain
- Hailed as one of the first pioneers of cryptocurrency alongside Kenya and Nigeria, South Africa has always had a steady foundation in cryptocurrency
Also read: Data suggests South Africa’s economy averted a technical recession
From headline to headline, Africa’s crypto adoption rate has caught the eye of many. Major players within the crypto space have turned to her for a chance to gain a sliver of the untapped potential it has in the crypto market. This has brought about significant change in various African countries. They include Kenya, Nigeria, El Salvador and Ghana, so other African countries have turned to reconsider their take on digital assets.
However, Africa owes a significant portion of its fame to South Africa, which has earned its nickname, the Trading Nation. Crypto traders within the country have inspired many and gained the government’s recognition and support.
What many ask is how did South Africa do it? How did a country accept crypto wholeheartedly without resistance from myths, misconceptions and even sceptical government officials? You’d be surprised at how simple these answers are. It is easy for every other African country to implement if given the right incentives.
South Africa’s success in crypto so far
Hailed as one of the first pioneers of cryptocurrency alongside Kenya, and Nigeria, South Africa has always had a steady foundation within cryptocurrency. Over the years, it has had one of the highest rates in cryptocurrency. According to Finder’s cryptocurrency adoption index report, over four million South Africans own digital assets. Its crypto adoption rate lies at 10%, which constitutes a range of various crypto coins such as Ethereum, Dogecoin, and Bitcoin, which leads.
Also read: South Africa wants equitable management of water resources shared with Mozambique
The steady rise of crypto trading within the trading nation was gaining significant popularity. Its governments started noticing this trend and investigated, and to their discovery, digital assets were a subset of Fintech. This solved the puzzle of the steady increase in Fintech activities within South Africa.
In 2019 the National Treasury, as part of the intergovernmental Fintech Working Group(IFWG), commissioned research on South African Fintech Companies. This was one of the first key starting points of its government’s interest in cryptocurrency.
Blockchain startups
As a by-product of South Africa’s increased crypto adoption rate, the development of blockchain startups to facilitate smooth and efficient transactions within its ecosystem grew. The various blockchain companies that have significantly benefitted from South Africa’s crypto adoption rate either directly or directly include;
Also read: South Africa’s Old Mutual targets launch of banking unit in 2024
- DBEX – Digital Based Exchange (DBEX) is a South African Fintech startup focusing on providing the necessary support the trading country and Africa require. Their main aim, like many others, is to assist the unbanked and underbanked to achieve long-term financial freedom. They believe digital assets will allow market consumers to transact and secure their financial future.
- Umphakathi weAfrika – This decentralized marketplace connects Africa’s blockchain and crypto enthusiasts, entrepreneurs, applications and innovations using blockchain’s trust protocols and a learning algorithm. It’s generally a platform where innovators and investors interact and showcase their investor’s interest in digital assets.
- Nuud Money – A hybrid crypto and neo bank that allows easy transactions between crypto traders and facilitates digital and non-digital currencies. They believe that the centralized and decentralized ecosystem can coexist with the proper functionalities and implementation of various regulations. Their core value proposition leverages crypto markets to provide guaranteed above-inflation-beating interest rates.
Driving force behind South Africa’s crypto adoption rate
Various aspects in Africa, there are multiple aspects have conditioned the continent to adopt digital assets and blockchain technology quickly. South Africa is one of, if not the most, advanced African countries. However, you’d be surprised that the various reasons affecting other African countries have also affected South Africa.
Rand Volatility
There were various instances in its past where the Rand was not the best solution for the commoner. According to forex brokers operating in South Africa, the Rand is one of the world’s most traded currencies due to its high volatility tendencies. Others even claim the difference between it and the standard crypto is just its make.
In 2009, after the 2008 financial crisis the trading country had, the Rand hit its highest mark ever recorded. The negative and positive swings of the fiat currency sent shivers down investors, and the local South African grew weary. Its state became so bad that the standard prices of commodities kept soaring and flatlining. This created an inconsistent pattern that significantly affected its citizens.
Also read: South Africa eyes green hydrogen investment worth US$250B
The total number of unbanked people in South Africa is among the lowest. However, its currency volatility discouraged its use. Volatility weakens local currencies, and thus locals needed an alternative; digital assets. Many individuals turned to digital assets to acquire some sense of stability—a way to protect their wealth from jumping in-between values. Imagine, one day, you’re a millionaire. The next, it’s worth a few thousand; no one likes that.
Crypto Mining became too expensive.
One of the most strange reasons digital assets became such a hit in South Africa started from a low point. When Bitcoin emerged from the shadows during the Golden Age of crypto, its primary methodology was crypto mining through the PoW mechanism.
This, however, had certain drawbacks, primarily due to the increased electrical consumption and its pricing. The Rand’s high volatility further contributed to this factor since it generally involved relying on the fiat currency to provide a means to acquire digital assets.
It was a complete circle around the same things South African crypto traders were trying to escape. Thus when crypto trading gained popularity, it became a beacon of hope for South Africa and, with due diligence, eventually earned its name as Africa’s trading nation.
Impact of Government participation and regulations
Many might not know this fact, but there was a time various experts claimed that the South African government failed its country. Primarily due to its fiat currency’s volatility. As a result of this consistent blame game, digital assets provided a solution to their dilemma. Hence, South African Reserve Bank began talks and research on incorporating various regulations and laws to apply to its country’s vast crypto adoption rate.
SARB intended to develop a regular sandbox to allow experts and those experienced in crypto to share, educate and practice fundamental ideas with real consumers under regular supervision. This was by far the fit positive impact any African government took.
Also read: S&P affirms positive outlook on South Africa
It did not seek to grab or tax hard-earned digital assets from crypto traders. Instead, it provides a conducive environment where both the nation and the traders benefit. Its determination and unorthodox approach make South Africa one of the leading African countries in Bitcoin.
In actuality, SARBs did achieve this goal as they finally and officially viewed crypto as a financial product. A field most countries are still trying to attain. This notice defines digital assets as a digital representation of value that a central bank does not issue. Still, it can be traded, transferred or stored electronically for payment, investment and other forms of utility.
Final remarks
South Africa acts as a beacon to other African countries seeking to incorporate digital assets within their economy. Although it did not start ideally, its significant strides in its government’s cooperation allowed crypto trades to thrive. They are essentially proving that it is indeed a crypto-trading nation.
