South Africa’s DeFi Sector Sees Bright Prospects Amid Growing Adoption

The largest economy in Africa, South Africa, is leading the way in cryptocurrency adoption and regulation on the continent. A recent report by the Financial Sector Conduct Authority highlights the promising future of the South African DeFi sector.

The Goal of the Study

The report, titled “Market Study on Decentralized Finance (DeFi) in South Africa,” aims to assist local regulators in understanding the role of DeFi in the country. The study is based on a survey of crypto asset service providers and was released on February 20, 2025.

The Numbers

The estimated annual revenue of the South African DeFi sector is approximately $2.8 million, with retail clients making up 71% of the market, followed by small and medium-sized enterprises. Key factors driving the sector’s growth include financial inclusion facilitated by DeFi, low transaction costs, and transparency.

More than a third of respondents believe that the South African DeFi sector’s Total Value Locked (TVL) exceeds $27 million, which is expected to reach $180 million by 2028. The top use cases for DeFi in South Africa include:

  • Payments (over 50% of respondents)
  • Lending and borrowing (47.6% of respondents)
  • Decentralized exchanges (33% of respondents)
  • Stablecoins (14.2% of respondents)
  • Staking, asset management, and tokenization

Risks and Regulations

The study identifies potential risks associated with decentralized finance, including price manipulation, security breaches, platform failures, and fraud. To mitigate these risks, respondents suggest improved regulation and educational efforts to elevate financial literacy.

The report emphasizes the need for regulations to factor in these risks to ensure user protection. Key market drivers in the country include increasing adoption by mainstream investors, the emergence of new DeFi protocols, the unbanked population, and the declaration of crypto as financial products.

South Africa as a Significant Nascent Crypto Hub

Sub-Saharan Africa is a region where the crypto sector is growing rapidly, driven by the demand for financial inclusion. South Africa has become a leading crypto hub in Africa, with a favorable legal climate and a growing number of crypto-friendly laws.

In October 2022, the Financial Sector Conduct Authority declared crypto a financial product, making it legal to use cryptocurrency in South Africa. Local crypto asset service providers are regulated under the Financial Intelligence Centre Act, with mandatory AML rules and a Travel Rule for crypto assets set to come into effect in April 2025.

According to recent trends, the South African crypto market was valued at $26 billion in 2023, with growing interest from institutional investors seeking custody solutions in the decentralized finance sector. The circulation of stablecoins in South Africa outperformed Bitcoin in 2023, reflecting the overall African trend of using crypto for everyday payments.

Experts from the local crypto industry believe that the upcoming elections in May 2025 will not affect the friendly crypto regulatory climate in South Africa.

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