The Financial Sector Conduct Authority reports that South Africa’s DeFi sector is projected to reach $180 million by 2028. With increasing adoption of cryptocurrencies and the need for improved regulations, the study highlights the sector’s growth potential while addressing associated risks and user protection strategies.
A recent study from South Africa’s Financial Sector Conduct Authority indicates that the decentralized finance (DeFi) sector is projected to reach $180 million by 2028. This sector is gaining traction within South Africa, a leader in crypto adoption on the continent. The study examines the role of DeFi in the local economy and addresses the need for clearer regulatory frameworks concerning cryptocurrency and banking relationships.
Launched on February 20, 2025, the report titled “Market Study on Decentralized Finance in South Africa” focuses on insights from crypto asset service providers. As South Africa emerges as a key player in the DeFi landscape of the 2020s, the study’s timing reflects the increasing economic impact of the sector and highlights the demand for enhanced regulations.
The study estimates that South Africa’s DeFi sector generates approximately $2.8 million annually, with retail clients comprising the majority at 71%. Factors contributing to the sector’s growth include financial inclusion, minimal transaction fees, and enhanced transparency in transactions. These developments suggest increasing confidence in DeFi’s role within South Africa’s economy.
However, along with its growth, the DeFi sector poses new risks, including price manipulation, smart contract security breaches, and fraud. The study emphasizes the importance of regulations that address these risks to safeguard users. Respondents of the survey suggest enhancing financial education as a critical strategy for protecting users against these vulnerabilities.
Over a third of respondents believe that South Africa’s total value locked (TVL) in DeFi exceeds $27 million. While this figure remains modest on a global scale, it demonstrates significant regional activity and growth. The projected increase in the DeFi market highlights the rising importance of alternative financial solutions for local residents.
Respondents identified primary use cases for DeFi, such as payments (54%), lending and borrowing (47.6%), and decentralized exchanges (33%). Additionally, other notable responses included stablecoins, staking, asset management, and tokenization. This data indicates that DeFi services are innovating local financial infrastructures and creating opportunities for both individuals and traditional finance players.
Market drivers identified include increased adoption by mainstream investors (62%), the emergence of new DeFi protocols (43%), and the unbanked population (33%). Furthermore, 29% acknowledged the impact of declaring cryptocurrencies as financial products. These factors underline the potential for DeFi to transform financial services in South Africa.
South Africa’s prominence in the crypto sector within Sub-Saharan Africa is bolstered by government initiatives fostering a conducive regulatory environment. Key developments include the Financial Sector Conduct Authority classifying cryptocurrencies as financial products in October 2022, even though this status does not confer legal tender status.
Regulatory measures include compliance under the Financial Intelligence Centre Act, mandating anti-money laundering protocols for crypto asset service providers. As of April 2025, South Africa is slated to implement a Travel Rule for cryptocurrency transactions, ensuring stricter oversight of the sector. According to Chainanalysis, the crypto market in the country was valued at $26 billion in 2023, reflecting increased institutional interest in DeFi solutions.
The findings of the Financial Sector Conduct Authority’s study reveal that South Africa’s DeFi sector is positioned for significant growth, projected to reach $180 million by 2028. While it offers vast opportunities for financial inclusion and innovation, it also presents various risks that necessitate effective regulatory measures to protect users. The interplay between regulatory efforts, user education, and market dynamics will be critical for the sustainable development of DeFi in South Africa.
Original Source: crypto.news
