While Africa is often considered to be the cradle of the adoption of cryptography, the greatest economy in the continent, in South Africa, is one of the main countries in the region in terms of adoption and regulation of cryptography. The new report published by the local financial regulator highlights the brilliant perspectives in the South African challenge sector.
The goal of the study
On February 20, 2025, the Financial Sector Conduct Authority published a study entitled Market Study on Decentralized Finance (DEFI) in South Africa. The study is based on a survey of service providers of cryptographic assets and aims to help local regulators better understand the role of DEFI in South Africa.
Timing is important because South Africa has become one of the main world countries in the DEFI sector in the 2020s. As the sector itself already shapes the country’s economic prospects, clearer regulations are in demand, in particular with regard to the relationship between banks and cryptographic asset service providers.
According to the study, estimated annual income from the South African challenge sector are $ 2.8 million. The main market players are retail customers (71%), followed by small and medium -sized enterprises. The key factors in the growth of the sector identified in the study are the financial inclusion facilitated by DEFI, the low transaction costs and transparency.
The growing importance of the DEFI sector in the local economy leads to new risks. The study underlines them, citing the manipulation of prices, the security violations of intelligent contracts, the potential failures of the platform and fraud as the main threats associated with decentralized finance. The risks described in the study include the risk of childcare, the risk of oracle, the risk of liquidity and many others. The study suggests that regulations should take these risks into account to ensure the protection of users.
Respondents believe that the main ways to protect users are associated with improving regulations and educational efforts to raise residents’ financial literacy.
The numbers
More than a third of respondents believe that the South African challenge sector exceeds $ 27 million, which is not a huge part of the world total but is still significant in the region. In addition, it grows quickly. The Global DEFI market in South Africa is expected to reach $ 180 million by 2028.
The study reveals the main use cases for DEFI in South Africa. More than half of the respondents use the crypto for payments, loans and loans arriving in second position with 47.6%. A third of respondents use decentralized exchanges and only 14.2% say they use stablecoins. Employed, asset management and tokenization are three other popular responses.
These responses show that the DEFI sector in South Africa offers banking and payment opportunities for residents while serving as a tokenization channel for traditional financing players.
Respondents provided prospects for market engines in the country, citing increasing adoption by traditional investors (62%), the emergence of new challenges (43%), the non -banished population (33%) and the crypto declaration as financial products (29%) as the main factors.
In general, it is sure to say that despite the name (decentralized finance in South Africa), the report is largely focused on the description of the DEFI sector in itself so that the regulators (the main audience of the report) know better how to manage the growing sector.
South Africa as an important emerging crypto center
Sub-Saharan Africa, in general, is a region where the cryptographic sector is developing rapidly, largely because cryptocurrencies have responded to the unsatisfied financial inclusion demand. South Africa, as one of the main economies of the continent, has become one of the most important crypto centers in Africa.
The local cryptography sector experienced significant changes in the 2020s when the government has implemented a series of Crypto friendly laws. More importantly, in October 2022, the authority of the financial sector declared Crypto as a financial product, which makes legal to use the cryptocurrency in South Africa, although the decision did not grant Crypto a status of legal tender. In general, the favorable legal climate has made South Africa one of the emerging crypto in the region and the world as well.
Local providers of Crypto asset services are regulated institutions under the law on the financial intelligence center. The LMA rules are compulsory for the casps operating in South Africa. To control the cross -border movement of value, the country has adopted a travel rule for cryptographic assets. He will come into force from April 2025.
According to Chainalysis, the South African cryptography market was estimated at $ 26 billion in 2023. Last year’s trends included the growing interest of institutional investors looking for childcare solutions in the decentralized finance sector. Reflecting the global African trend in the use of crypto for daily payments, the circulation of stablecoins in South Africa surpassed Bitcoin in 2023. Experts from the local cryptography industry claim that the elections planned for May 2025 will not affect a climate of friendly cryptographic regulation.
