Last year, the South African (SA) crypto sector was in crisis. This is according to an excerpt from the upcoming Chaina Analysis 2024 report, “The Geography of Cryptocurrency.” The article shows that Africa’s largest economy has attracted approximately $26 billion in cryptocurrencies thanks to the growing adoption of traditional finance (TradFi) and institutional activity.
Absa Group’s Rob Downes weighs in on the TradFi crypto connection it was filmed in the country. He said:
We are seeing growing interest from institutional clients, especially in digital asset custody solutions, which will play a critical role in supporting the crypto ecosystem here.
— Rob Downes
Other experts, however, believe that South Africa owes much of its crypto boom to its involvement in retail trading. One of them is Karel van Wyk, founder MoneyBadger, cryptocurrency payment solutions provider. He noted that the national cryptocurrency market, and even more so its payment space, is steadily developing.
Van Wyk recalled how transaction costs previously hampered on-chain cryptocurrency payments. However, the introduction of Layer 2 solutions and advanced payment APIs has increased the viability of small daily cryptocurrency transactions. This in turn allowed retailers to accept them and pay in rands.
South African rules are a boon for cryptocurrencies
While regulations often create barriers to the use and growth of cryptocurrencies, this is not the case in South Africa. Rob Downes has praised the country’s watchdog, the Financial Services Authority (FCSA), for creating South Africa’s crypto market. He said the FCSA’s decision to adopt existing financial laws to oversee crypto assets brought clarity in this area.
He added that the favorable regulatory environment has encouraged investors and businesses to develop their cryptocurrency aspects responsibly. This subsequently prompted financial institutions to explore the possibility of providing them with crypto services.
The banker also linked the growth of the South African cryptocurrency market to the growth of Rand trading pairs. In his opinion, this growth signals the maturation of the crypto ecosystem, a harbinger of expanded institutional interaction. He concluded that South Africa’s exchanges are becoming increasingly sophisticated, which is a critical factor in developing trust with all investors.
Banks help bridge the gap between TradFi and cryptocurrency
Downs reiterated the critical role banks play in the merging of traditional finance and cryptocurrencies. He says demand for Absa’s cryptocurrency services, for example, has tripled in the last year and a half. These interests include investments, crypto payments and banking exchanges.
He also acknowledged the newness of financial institutions (FIs) in cryptocurrency, insisting that demand will push them to adapt quickly. In his opinion, their experience and control position them to lead blockchain-focused finance. By integrating this technology into their functions, financial institutions will promote cryptocurrency adoption at the individual and institutional levels.
