In the marble halls of the South African Reserve Bank (SARB) in Pretoria, officials are sounding the alarm with increasing shrillness. Across the country’s cities, however, nearly 8mn users now see dollar-pegged stablecoins as a rational hedge against a volatile rand, a workaround for exorbitant remittance fees, and a quiet escape hatch from the country’s labyrinthine exchange controls. This is a peculiar inflection point for the country. To the regulator, it is an R80bn ($4.6bn) shadow market operating in what is politely termed a “regulatory gap.”

The collision between these two realities — the slow grind of legislative machinery and the warp speed of digital finance — will determine whether South Africa becomes a model for emerging market crypto regulation, or a cautionary tale.

The numbers keeping Pretoria awake

The growth of stablecoins in South Africa has been less a curve and more a vertical line. Trading volumes have exploded from a modest R4bn ($232mn) in 2022 to nearly R80bn by October 2025 — a twentyfold increase in three years, according to the central bank. 

The country’s “Big Three” platforms — Luno, VALR, and Ovex — now service 7.8mn registered users holding roughly $1.5bn in assets. To put this in perspective: more than 13 per cent of the South African population is now active on crypto exchanges. They are not merely dabbling in speculative assets; they are utilising them as financial infrastructure.

Crucially, the narrative has shifted. Bitcoin, once the undisputed king of the asset class, has been dethroned by dollar-pegged stablecoins as the preferred trading pair. The driver is not technological utopianism, but simple economics. For anyone earning a rand-denominated salary, the appeal of a token pegged to the greenback is self-evident after a decade of currency depreciation.

The SARB’s latest Financial Stability Review is uncharacteristically blunt. Herco Steyn, the central bank’s lead macroprudential specialist, has warned that without comprehensive oversight, authorities are effectively flying blind.

The anxiety is not theoretical. The bank estimates that R63bn ($3.65bn) has exited the country through crypto channels since 2019, largely sidestepping the surveillance of traditional banking systems. For a nation that relies on strict capital controls to protect its foreign reserves, this is not just a loophole; it is a leak in the hull.

The flight to digital safety

The utility argument for stablecoins is difficult for even the most sceptical regulator to dismiss. When local currency softens and cross-border movement costs a fortune, crypto looks less like a casino and more like a utility company.

Cross-border remittance costs in Sub-Saharan Africa remain stubbornly high, yet stablecoins slash the cost of a $200 transfer by an average of 60 per cent compared with traditional rails. For a migrant worker, that is the difference between solvency and arrears.

Luno’s internal data highlights this behavioural pivot. The platform added 530,000 local customers in the past year alone, but the user profile has matured. The days of buying Bitcoin and praying for a “Lamborghini” are fading. Today’s users are staking Ethereum for yield, accessing tokenised US equities to skirt offshore allowance limits, and using Luno Pay at nearly 700,000 merchants.

Tether (USDT) now sits comfortably among the top five cryptocurrencies by volume. Its dominance reflects a universal truth of emerging markets: when volatility becomes the norm, the population will outsource its monetary policy to the Federal Reserve via whatever digital proxy is available.

Demographics reinforce this shift. Women now comprise 36 per cent of users, and the heaviest concentration is in the 25–44 age bracket — prime earning years. This is not a rebellion led by hoodies in basements; it is risk management by the middle class.

The ‘interim’ lasting three years

South Africa’s regulatory approach can be best described as “iterative” — a polite euphemism for “slow”.

In October 2022, the Financial Sector Conduct Authority (FSCA) declared crypto assets to be financial products. It was billed as an “interim measure” to bring the sector under existing conduct laws while a bespoke framework was drafted. Three years later, the interim is becoming permanent.

The Conduct of Financial Institutions (COFI) Bill — first published in 2018 — is expected to reach Cabinet by late 2025, with full enactment slated for 2026. Assuming a standard three-year transition period, comprehensive regulation may not arrive until 2029. In crypto time, that is roughly three centuries away.

In the vacuum, the FSCA has been busy. It has processed over 400 applications for Crypto Asset Service Provider licences, approving over 200. The regulator has been thorough, conducting on-site inspections that have terrified compliance officers and lent a veneer of legitimacy to the survivors.

Yet, legitimacy is not clarity. Token issuers remain largely unregulated, and stablecoins operate in a grey area — neither explicitly banned nor formally endorsed. For a sector processing R80bn a quarter, the term “grey area” is doing a great deal of heavy lifting.

The global lag

South Africa is hardly alone in its confusion. The Financial Stability Board noted in October that most of the developing world lacks a framework for “global stablecoins.”

While the US has moved forward with the stringent GENIUS Act — requiring 100 per cent reserve backing — and the EU has implemented its Markets in Crypto-Assets (MiCA) regulation, emerging markets are playing catch-up.

This lag is dangerous. Standard Chartered projects that digital dollars could drain up to $1tn from emerging market bank deposits over the next three years. For central bankers, this is the nightmare scenario: the “dollarisation” of the economy not through physical cash, but through digital ledgers they cannot control.

The uncomfortable truth

The path forward for South Africa likely lies in “pragmatic integration” — licensing exchanges and forcing them to act as gatekeepers, rather than trying to ban the asset class entirely. The FSCA appears to understand that it is managing an evolution, not staging a revolution.

However, there is an uncomfortable truth that neither regulators nor crypto evangelists care to admit.

Stablecoins in South Africa thrive precisely because the traditional financial infrastructure has failed to meet user needs at an acceptable price point. High fees, slow settlement times, and restrictive exchange controls are not abstract policy choices; they are frictions that drive capital elsewhere.

South African crypto users are not ideological libertarians plotting the downfall of the fiat currency system. They are pragmatic actors trying to send money to relatives or save in a currency that holds its value. Stablecoins are tools, not theology.

Regulation can address fraud, money laundering, and systemic risk. But it cannot legislate away the demand that created this market. Until traditional finance becomes cheaper and faster, the R80bn stablecoin obsession is not a bubble — it is a correction.

2 Key Trends to Watch

• The COFI Timeline: If the legislation stalls again in 2026, expect the “grey area” to expand, potentially inviting harsher crackdowns from a frustrated Reserve Bank.
• Bank Integration: Traditional banks are hiring crypto teams, but are they integrating? Absa Bank recently entered a strategic partnership with global blockchain firm Ripple to offer digital asset custody services to its institutional clients in Africa. If banks refuse to bank the licensed crypto platforms, the shadow system will persist.