Why crypto is particularly popular in SA
SOUTH Africa is a leading market for cryptocurrency adoption, according to the South African cryptocurrency exchange, Luno. This country ranks second after Nigeria in terms of the highest number of Google searches for the term “bitcoin”, says Marius Reitz, Luno’s general manager for Africa.
“Even though the price of cryptocurrencies has declined recently, an average of R90 million in bitcoin is traded in South Africa daily,” Reitz pointed out.
He said there are several reasons for crypto’s popularity in South Africa:
◆ Trading and financial infrastructure. South Africa offers established platforms and has trusted financial infrastructure in place. “A high percentage of South Africans have active bank accounts, even though we still have some unbanked citizens. South Africa also has high mobile penetration and a well-established financial services market,” he said.
◆ Pioneers in cryptocurrency. When Luno launched in South Africa in 2013, it was the first cryptocurrency platform in Africa and one of a handful of credible global cryptocurrency platforms. Many of the exchanges that started around the same time no longer exist.
In addition to Luno, South Africa has produced some global crypto heavyweights, including Vinny Lingham of Civic (ID security platform), Fluffy Pony (Riccardo Spagni) of Monero (enhanced privacy cryptocurrency) and Custos (content protection).
◆ Emerging markets want change. Luno research conducted recently across seven key markets, including South Africa, analysed attitudes towards the financial system.
“We anticipate that developing markets will be the lead adopters of cryptocurrency. People in emerging markets tend to be more financially savvy out of necessity. Interestingly, the results of Luno’s Future of Money survey indicate that respondents in South Africa are more savvy with their money than those in European markets,” Reitz said.
◆ Flexibility of payments. For South Africans, limitations with the financial system mean that sending money across borders is expensive, time-consuming and often unreliable.
“There are large remittance flows from South Africa to other countries in the SADC region, of which a portion is informal due largely to the high costs and complexity involved. It is vital that we reduce the cost and complexity associated with moving money seamlessly across the continent,” he said.
◆ Cross-border trade. The African Free Continental Trade Agreement (AfCTA), which was ratified in July by 22 member states, represents a major opportunity for cryptocurrency and blockchain. AfCTA seeks to create the world’s largest free-trade area by allowing for the free movement of goods and people among African states.
“The anticipated increase in cross-border trade within Africa makes a strong case for the use of cryptocurrencies and blockchain technology. While there is still resistance from some governments, we are constantly engaging with regulators and fiscal authorities.
“Our experience is that they recognise that cryptocurrencies are here to stay and are actively working to sensibly regulate the market,” said Reitz.
◆ Currency fluctuations. The rand was named as the most volatile major currency in August and has lost 30 percent of its value since 2014. Although cryptocurrencies are usually volatile during the early stages of adoption, fiat (traditional) currencies are designed to provide stability.
◆ Fair regulation. The South African Reserve Bank has established a working group, including industry players, to craft a regulatory framework for cryptocurrency.