Here’s why South Africa is embracing cryptocurrencies
- South Africa is positioning itself to embrace a cryptocurrency surge over the coming years.
- South Africa already boasts the most advanced financial sector in the continent.
- The country already recognizes cryptos as an investment and taxable asset.
South Africa’s capital market and financial regulators are forecasting growth in crypto investments nationwide, leading the country to officially embrace crypto investment and trade laws. This is in stark contrast to policies in most other African countries, which are aimed at avoiding crypto asset trade transactions, Quartz Africa reports.
Top African markets
South Africa, Kenya, and Nigeria are among the best markets to invest and trade in cryptocurrencies. Nigeria is the African country with the highest volume of Bitcoin (BTC/USD) trade, amounting to $99 million in the first quarter of this year alone, QZ notes. Kenya ranked second with $34.8 million and Ghana was third with $27.4 million.
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Although South Africa ranked fourth with just under $26 million, it might be better positioned for sustainable growth compared to its African neighbors. This is due to South Africa boasting the most advanced financial sector in the region and its government already recognized cryptocurrencies as an investment and as a taxable asset, the report notes.
Kenya and Nigeria, for example, oversees a mostly underregulated market for cryptocurrencies. Mainstream exchanges are facing challenges in settling transactions that involve banks. Market competition is pushing traders to adopt underground trading alternatives. In a review this month, the UN noted:
Given the constantly changing nature of the cryptocurrency world, one of the biggest risks is lack of proper regulation. Regulation is exactly what the industry needs most.
An impending boom in digital asset trade
South African finance experts predict a boom in cryptocurrency trade, not only domestically, but across the continent. South Africa is making an effort to regulate the industry ahead of rapid growth and to better address increasing incidences of criminals demanding ransom in cryptocurrency.
New regulations to protect against terrorist financing and money laundering will address issues such as customer due diligence, identification and verification, keeping transaction and client data, and checking for unusual or suspicious activity.
The South African Reserve Bank will also play a role in monitoring cryptocurrency assets and service providers and will be looking out for “cross-border financial flows,” according to QZ. Banks and other financial institutions will limit their future exposure “as the risk could over time spill over” and result in financial stability concerns.