Cryptocurrencies currently form a small portion of total investment capital in South Africa managed by fund managers, wealth managers, and financial advisors.
However, the recent approval by the Financial Sector Conduct Authority (FSCA) of several financial service provider licences could change this, according to new research from crypto investment app Luno.
The company’s State of Crypto in Africa report asserts that the legitimacy from the FSP licences could open the conversation with fund managers, wealth managers, and financial advisors – and that this could bring a fresh influx of investors into crypto.
Christo de Wit, Luno’s country manager for South Africa, says, “Luno engaged with people on the ground to get a snapshot of cryptocurrency in Africa.
“Bitcoin’s market cap recently overtook that of silver which many see as a sign of its graduation into mainstream investing. This report aims to give insight into the state of crypto in the region, how it is being used, the immense potential, and the challenges.”
There was an increase of over 43% in the number of first-time crypto buyers in South Africa on Luno in March 2024. At the same time, Bitcoin posted a new all-time high and other cryptos rallied to multi-year highs.
“Research indicates that investors are open to crypto investments if recommended by financial advisors,” says De Wit. “Many advisors have seen a lack of regulation as a barrier to entry. With FSCA licensing, the asset class should attract the attention of more sophisticated investors that are offered professional and responsible advice.”
It’s not just regulation driving adoption in Africa, he says, crypto is fulfilling a fundamental need across the continent.
Around 57% of adults in Africa do not have access to a bank account and African countries are among the most underbanked globally. Although sub-Saharan Africa is one of the smallest economies in terms of transaction volumes, crypto adoption is among the highest in the world in Nigeria, South Africa, and Kenya.
There’s also a growing trend towards Bitcoin and stablecoins for hedging purposes, De Wit adds, which may indicate that grassroots crypto adoption in Africa is closer to the decentralised ideals of cryptocurrencies being used for real payments when compared with other regions.