The Evolving Crypto Landscape in South Africa

South Africa’s crypto scene has undergone a remarkable transformation in recent years. While many of the country’s citizens appreciated the appeal of digital assets from day one, the same cannot be said for TradFi players and regulators, whose initial skepticism largely mirrored that of their contemporaries in the West. Gradually, though, that posture is softening, a consequence of mounting demand from both retail and institutional clients. 

It’s been three years since the country’s Financial Sector Conduct Authority (FSCA) classified digital assets as financial products, providing a degree of regulatory clarity to crypto-curious institutions. Unsurprisingly, industry engagement has increased in the interim, with trading pairs against the South African Rand (ZAR) now reaching hundreds of millions in monthly volume. Stablecoin usage is also on the up, with a 2024 Chainalysis report showing they have surpassed bitcoin as the most popular cryptocurrency received on local exchanges – no surprise given the volatility of Rand.

TradFi at a Crossroads

Of course, it would be an exaggeration to say that the banking sector has embraced crypto with open arms. South Africa’s central bank chief Lesetja Kganyago recently criticized the crypto industry’s lobbying of US policymakers, claiming it could lead to regulatory capture. Kganyago also warned against governments using Bitcoin as a reserve asset.

Actions speak louder than words, and as recently as December, the FSCA announced that it had approved the licenses of 248 firms to operate as crypto asset service providers (CASPs), declining just nine applications. One of the country’s largest banks, Absa Group Bank, is also said to be considering offering institutional-grade crypto custody services to its clients, yet more evidence of TradFi’s crypto-friendly pivot.

Despite the typical concerns about money laundering and terrorist financing, as well as the potential disruption crypto could cause to legacy banking models, digital assets have, for the most part, won the PR war, with a resultant shift in institutional perspectives. Which is why a number of the region’s traditional financial firms have partnered with crypto exchanges to meet their own customers’ demand for BTC, USDC, and the rest.

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In a sense, TradFi is now at a crossroads, and banks yet to embrace crypto may risk losing market share the longer they dig in their heels.

VALR: Pioneering the Digital Asset Frontier

Given the largely conservative approach of banks, South Africa’s crypto-native firms have been understandably keen to build bridges between TradFi and crypto. One example is VALR, a Johannesburg-based exchange founded in 2018. Africa’s largest crypto exchange by trading volume, it actively works with local banks to serve and allow them to offer crypto asset services to customers.

The VALR brain trust is not alien to the legacy banking perspective: its co-founder Farzam Ehsani was once the Blockchain and Crypto Lead at Africa’s largest bank, FirstRand Bank, a post he left to start VALR.

The exchange has grown rapidly over the last seven years, with services catering to both retail and corporate clients. In 2022, VALR secured Africa’s largest-ever crypto VC raise of $50 million, giving it a valuation of $240 million. Today, it serves over 1,000 corporate customers and more than a million retail worldwide.

Negative maker fees, robust API tools, and support for over 75 digital assets across spot, margin, futures, and OTC are among the platform’s offerings. It also boasts a lending platform that makes hourly interest payments (unlike TradFi’s daily rate), and its intuitive swap terminal for fiat-to-crypto conversions underlines its long-standing commitment to bridging TradFi and blockchain. 

Not all of the platform’s services cater to seasoned traders. VALR Pay is a free money transfer mobile app for instant crypto or cash payments, suitable for individuals and merchants. You don’t need to remember wallet addresses, either: all you need is a recipient’s mobile number, email address, or VALR Pay ID.

What Next?

The number of secure, regulated crypto channels in South Africa is rising, and a future in which digital assets play a central role in the country’s financial system is far from outlandish.

Michael Jordaan – CEO of Stellenbosch-based private investment firm Montegray Capital and an early VALR investor – believes that within a decade, all financial institutions in the country will have some crypto offerings.

That outcome depends on the wider industry’s maturation, the emergence of more crypto-TradFi bridges, and the market’s continued appetite for digital assets. Overall, South Africa will likely remain at the forefront of Africa’s crypto revolution.