South Africa reiterates crypto and stablecoin risks amid rising use

The South African Reserve Bank has reiterated concerns that cryptocurrencies and stablecoins pose significant risks to the country’s financial sector due to gaps in regulatory oversight.

The central bank’s latest concerns were outlined in its biannual Financial Stability Review, released on Tuesday.

Quick facts

SARB said the absence of a complete regulatory framework for crypto assets and stablecoins remains a key vulnerability in South Africa’s financial system.

• Because crypto is digital and borderless, the bank noted it can be used to bypass existing exchange control laws, which currently do not cover digital assets.
• Herco Steyn, SARB’s lead macroprudential specialist, said the lack of complementary regulation limits oversight and could heighten risks if not addressed.
• Steyn added that progress on new rules is expected next year, but warned that regulatory gaps in the meantime remain “a significant concern.”

Regulatory solution

SARB and the National Treasury are working on new rules to monitor cross-border crypto transactions.

• Planned reforms include amendments to exchange control regulations to bring crypto assets under formal oversight.
• Authorities also intend to establish a unified framework for reporting crypto-assets by financial institutions.

Key context

Earlier this month, Reserve Bank Governor Lesetja Kganyago also raised concerns about the rising influence of stablecoins, arguing that their growing adoption could undermine central bank sovereignty.

• Kganyago questioned the classification of cryptocurrencies as currencies, saying they function more like assets.
• The governor warned that in countries with limited access to foreign exchange, stablecoins allow users to effectively “manufacture” dollars outside central bank oversight.
• While stressing that banning crypto would be counterproductive, Kganyago said regulators must strengthen trust in local currencies to reduce reliance on U.S. dollar-linked digital assets.

Zoom out

• Stablecoins have grown rapidly across African markets, particularly where access to foreign currency is restricted or volatile.
• SARB has been expanding its supervisory frameworks since 2022, classifying crypto assets as financial products and designating crypto-asset service providers as accountable institutions.
• More than 240 companies have since applied for and received licenses under the Financial Sector Conduct Authority.