South Africa’s DeFi Sector Set to Reach $180 Million by 2028, Report Finds

A new study from South Africa’s financial regulator forecasts the DeFi sector will grow to $180 million by 2028. The report emphasizes the need for improved regulation to address risks while promoting financial inclusion. Major use cases include payments, lending, and borrowing, highlighting the sector’s importance in the local economy.

A recent report from South Africa’s Financial Sector Conduct Authority indicates promising growth prospects for the nation’s decentralized finance (DeFi) sector, projecting it will reach $180 million by 2028. This study aims to provide insights to local regulators about the role of DeFi and the necessity for clearer regulations as the sector influences the country’s economic landscape.

The Financial Sector Conduct Authority released its Market Study on Decentralized Finance on February 20, 2025, following a survey of crypto asset service providers. As South Africa has risen to prominence in the DeFi realm during the 2020s, it is crucial that regulations evolve to address the growing partnership between banks and crypto service providers.

Currently, the South African DeFi sector generates an estimated annual revenue of $2.8 million, with retail clients comprising 71% of the market. The primary growth drivers identified include enhanced financial inclusion, lower transaction costs, and increased transparency in financial transactions.

Despite its growth, the increasing importance of DeFi also introduces new risks, such as price manipulation, smart contract vulnerabilities, platform failures, and fraudulent activities. The study emphasizes the need for regulatory frameworks that consider these risks to ensure user protection, with improved regulation and financial education viewed as key protective measures.

More than a third of survey participants estimate that the total value locked (TVL) in the South African DeFi sector exceeds $27 million, underscoring its regional significance and rapid expansion. Key use cases within the sector include payments, with over half of respondents utilizing cryptocurrencies for this purpose; lending and borrowing follow closely behind.

Expectations for market drivers indicate increased participation from mainstream investors (62%), the emergence of new DeFi protocols (43%), and financial inclusion for the unbanked (33%) as vital contributors to growth. The study serves primarily to inform regulators on the burgeoning DeFi landscape in South Africa.

As one of the leading economies in Sub-Saharan Africa, South Africa has emerged as a vital crypto hub, benefitting from favorable regulatory changes initiated by the government in the 2020s. The Financial Sector Conduct Authority’s classification of crypto as a financial product, effective from October 2022, has legalized cryptocurrency usage in South Africa.

Despite not attaining legal tender status, this regulatory framework fosters a supportive atmosphere for the development of the crypto sector. Local crypto service providers are regulated under the Financial Intelligence Centre Act, enabling compliance with anti-money laundering requirements.

According to Chainanalysis, the South African crypto market reached a valuation of $26 billion in 2023, with increased institutional interest in DeFi solutions. Additionally, stablecoins have surpassed Bitcoin in circulation, reflecting the trend of using cryptocurrency for everyday transactions. Local industry experts remain optimistic that upcoming elections in May 2025 will not disrupt the favorable regulatory environment for crypto.

In summary, South Africa’s DeFi sector is poised for significant growth, expected to reach $180 million by 2028. The Financial Sector Conduct Authority’s study highlights the importance of regulatory frameworks to mitigate inherent risks while promoting financial inclusion and user protection. With a supportive legislative environment, South Africa is firmly positioning itself as a key player in the growing crypto landscape across Africa.

Original Source: crypto.news