South Africa is making significant strides in the world of decentralized finance (DeFi), according to a recent study released by the Financial Sector Conduct Authority. The study, titled Market Study on Decentralized Finance (DeFi) in South Africa, aims to provide insights into the role of DeFi in the country and assist regulators in understanding this emerging sector.
The report highlights the rapid growth of the South African DeFi market, with an estimated annual revenue of $2.8 million. Retail clients make up the majority of users in the market, followed by small and medium-sized enterprises. Key factors driving this growth include financial inclusion, low transaction costs, and transparency.
However, with growth comes risks, as outlined in the study. Price manipulation, security breaches of smart contracts, platform failures, and fraud are identified as the main threats associated with decentralized finance. To address these risks, the study suggests the need for clear regulations that prioritize user protection.
In terms of numbers, the study reveals that the total value locked (TVL) in the South African DeFi sector exceeds $27 million, with projections to reach $180 million by 2028. The top use cases for DeFi in South Africa include payments, lending and borrowing, decentralized exchanges, stablecoins, staking, asset management, and tokenization.
Looking ahead, respondents cite increasing adoption by mainstream investors, the emergence of new DeFi protocols, the unbanked population, and the declaration of crypto as financial products as key market drivers in the country. Overall, the report aims to provide regulators with a better understanding of the growing DeFi sector in South Africa.
South Africa has emerged as a significant crypto hub in Africa, thanks to favorable laws and regulations introduced in the 2020s. The government’s decision to declare crypto as a financial product has paved the way for increased adoption and investment in the sector. Crypto asset service providers in South Africa are regulated under the Financial Intelligence Centre Act, with mandatory anti-money laundering (AML) rules in place.
According to Chainanalysis, the South African crypto market was valued at $26 billion in 2023, with growing interest from institutional investors in DeFi custody solutions. Stablecoins have also gained traction in the country, surpassing Bitcoin in terms of circulation. The upcoming elections in May 2025 are not expected to have a significant impact on the crypto regulatory climate in South Africa.
Overall, South Africa’s DeFi sector is on a path of rapid growth and development, with regulators and industry players working together to ensure a safe and thriving environment for users and investors alike.