A recent Hootsuite study revealed that South Africa ranks first in the world for the highest percentage of internet users who own cryptocurrencies. The social media management firm conducted the global survey in partnership with London-based WeAreSocial.
According to the report, 10.7 percent of internet users in South Africa own cryptos. This was the highest ratio globally, with Thailand and Indonesia following suit at 9.7 and 9.3 percent respectively. South Africa ranked above some of the renowned crypto powerhouses including Switzerland at 7 percent, South Korea at 6.3 percent, the U.S at 5.3 percent and Japan at 4.3 percent.
The country’s ratio was also twice the global average – which stood at 5.5 percent, the report further revealed.
The survey results may come as a shock to many who thought cryptos were the preserve of more ‘developed’ nations. And yet, for those who have been involved in the South African crypto market, this was just a confirmation of what they already knew.
In a recent chat with Eugene Madondo, I learned that the South African crypto market has been expanding rapidly, even during the crypto winter.
Madondo is the digital marketing strategist at Coindirect, a Cape Town, South Africa-based crypto exchange. Coindirect is one of the more well-established exchanges in the country, offering both a mainstream crypto trading platform and a peer-to-peer trading solution. It also has operations in other African and European countries, with Kenya, Ghana and Nigeria being the other main markets. According to its website, it offers its services in 132 countries globally, encompassing the six continents.
Bitcoin’s South African Dominance
In South Africa, just like in most other nations, bitcoin reigns supreme. The currency’s dominance globally stands at 51 percent, but in South Africa, it’s even higher than that. “So bitcoin is dominant, yes but there is a lot of interest in altcoins in South Africa and we fill the gap for an easy way to trade altcoins without using international exchanges” said Madondo.
One of those altcoins is XRP, a crypto loved and loathed in equal measure, according to Madondo. The crypto has been gaining a cult-like following in the past year.
Yet another trend that Coindirect has observed is a rising interest in stablecoins. “They garner a lot of interest as well. You will often find many debates on our social media platforms whenever we publish anything about USDT or stablecoins.”
Just last month, one stablecoin project invested in Coindirect. MakerDAO, of which Ethereum founder Vitalik Buterin is a big fan, participated in the €1 million funding round for the project. Blockchain.com and Concentric were the other investors.
Madondo revealed that as part of the deal, the two firms will partner more in future projects. Coindirect will also be adding Maker’s DAI stablecoin to its platform.
Mirroring Global Trends
The crypto industry in South Africa may have idiosyncrasies, but in some fundamental ways it mirrors global trends. It’s different in that interest in cryptos has been steadily increasing even during the bear markets. This is different from Western and European countries in which interest has dipped significantly.
However, there are some trends that it replicates from the global market. The first is the use of bitcoin as a speculative asset rather than a currency, Madondo suggested. This came as a surprise, given the widespread narrative that cryptos in Africa are looked at for transactions. But Coindirect observes users selling their cryptos when the prices go up slightly, buying when the prices dip. This suggests that they are leveraging the crypto volatility to make money.
Even as a speculative asset, bitcoin is giving a much-needed solution in the country. South Africa is one of the continent’s biggest economies, only second to Nigeria.
Unfortunately, it also has the highest income inequality in the world according to a World Bank 2018 report. The country gained independence from a heavily racist regime two and a half decades ago. However, the damage that apartheid had on the country is far from corrected.
A very small minority of elites controls the vast majority of resources. This makes it crucial for the country’s majority, which lives in poverty, to find an alternative financial system that doesn’t oppress the many for the gain of the few.
The Role of Regulation
The country has been making strides in crypto regulation. Initially, as with almost every other African nation, the government stayed out. But as the people’s interest grew, the government had to step in. However, the regulations are far from comprehensive, with the country’s central bank working with various stakeholders to formulate and implement favorable regulations.
Stephen Young, Coindirect’s chief procurement officer said that the exchange is in full support of regulations. In an interview in January, he stated: “Coindirect welcomes the recent amendments to the Financial Action Task Force (FATF) Recommendations. Having clear regulation that helps protect consumers while allowing the development and growth of this nascent industry is a positive step that will help speed adoption and foster responsible innovation.”
Support for regulations in the crypto market has come from many other stakeholders in the crypto industry. Luno’s general manager for Africa, Marius Leitz also recently reiterated Luno’s support for regulations. Luno is a major player in the African crypto scene, offering both wallet and exchange functionalities. Leitz stated in a press release:
“We are very much in favor of regulation and we are actively working with a number of central banks and financial regulators, including the SA Reserve Bank, to drive regulation for cryptocurrency. Regulation will provide consumers or potential consumers with the comfort that the service they are dealing with is held to defined regulatory standards. Imposing regulations will, in turn, enhance general trust in and stability of the market.”
According to Madondo, regulation in the country has not had much of an impact yet. A majority of the traders invest in bitcoin without the slightest knowledge of what the law requires of them. However, it puts people’s mind at ease knowing that the government is pro-bitcoin and that it doesn’t intend on banning the asset class – as some other African nations have done.
The author is not invested in any digital asset mentioned in this article.