South Africa leading the way in Africa’s Bitcoin boom

Sub-Saharan Africa has the highest adoption and use of Bitcoin in the world, and South Africa’s regulators are leading the way in making cryptocurrencies more accessible.

This is according to Luno South Africa country manager Christo de Wit, who told Kaya Biz that there have been significant developments in the cryptocurrency space over the past few years – and rightfully so.

“I think there initially was a lot of confusion, and a lot of people did not understand, you know, what cryptocurrencies and what Bitcoin was,” he said.

However, a recent report by Chainalysis found that the adoption and use of Bitcoin in Sub-Saharan Africa is the highest in the world. 

The cryptocurrency industry has come under a lot of scrutiny, and the regulatory framework around this technology only came to the forefront in the last few years, he said.

In October 2021, cryptocurrency regulations in South Africa took a  massive step forward when the FSCA declared cryptocurrency a financial product.

This effectively drew cryptocurrencies “fully into the regulatory framework”, De Wit explained. 

“And what that has in effect is that it now offers consumers a safe space to invest in this form of investment or asset class. And that there’s a bunch of rules and regulations at play to monitor this space.”

He said a proactive approach towards regulation usually leads to the cryptocurrency industry growing and developing more maturely.

“And I think that also speaks volumes to how the South African regulators are actually leading the way on the continent in driving proactive regulation on this front,” he said.

In South Africa, cryptocurrencies are mostly used as an investment product or an asset class rather than legal tender – something the South African Reserve Bank has made very clear is not allowed.

However, on the rest of the continent, there are more varied use cases for cryptocurrency, including a transaction class or a form of tender.

De Wit ascribed the high Bitcoin adoption and use rate in Sub-Saharan Africa to factors like inflation and destabilised currencies.

“In economies where there’s very high inflation or destabilised currencies, consumers are using Cryptocurrency as a hedge against inflation,” he said.

The Chainalysis report reached a similar conclusion. 

“It may be that Sub-Saharan Africa residents are turning to so-called ‘digital gold’ for an alternative store of value,” it said.

“Many countries in the region have struggled with rising inflation and debt, making cryptocurrency an attractive means of storing value, preserving savings, and attaining greater financial freedom.”