South Africa is set to officially embrace cryptocurrency trade and investment laws, with its financial and capital markets regulators predicting an increase in crypto activity in the country.
The move by the regulators is a result of the rapid rise in crypto-trade in South Africa and rising fraud cases where a ransom is demanded in cryptocurrency.
According to a report from the working group, daily crypto asset trading values in South Africa were “exceeding $145 million for the first time” in January 2021. The new regulations are aimed at fostering transparency and minimizing the abuse of cryptocurrencies for illegal activities.
However, South Africa still plans on limiting the exposure of banks and other financial institutions to crypto-assets ”as the risk could over time spill over” and create financial stability risks, according to the new regulatory framework.
Financial regulators in other African countries such as Zimbabwe, Nigeria, and Kenya have already banned banks from processing transactions relating to cryptocurrencies. As a result, investors have turned to the adoption of mobile money, and other digital payments mean to settle cryptocurrency transactions.
These markets are, however, the top markets for trade and investment in bitcoin and other cryptocurrencies in Africa. Recently, a study placed Nigeria “as the top peer-to-peer bitcoin trading nation on the continent” with $99 million in trade volumes in the first quarter of 2021, while volumes for Kenya and Ghana came in second and third with $34.8 million and $27.4 million respectively. South Africa was fourth with $25.8 million.
The lack of regulation in these big markets pushes users to adopt peer-to-peer trades and underground trading alternatives as mainstream crypto exchanges and other open platforms encounter hurdles in settling payments involving banks.
According to a video posted on YouTube by LocalBitcoins–a trading platform for peer-to-peer transactions–mobile money platform M-Pesa is the most common payment method followed by Pesalink, a payments transfer platform, in Kenya, where the number of crypto traders on the platform had risen to 17,000 by the end of February this year.
