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South Africans have an appetite for cryptos

Significant price volatility has not scared investors off.
South Africans, Malaysians and Indonesians have more appetite for cryptocurrencies than their peers in many other countries. Picture: Luis Tato/Bloomberg

Nearly all middle-class South Africans of all races and ages are familiar with cryptocurrencies, and if they don’t already own a cryptocurrency, then they are interested in owning one.

This is according to research conducted on behalf of Luno, a South African crypto exchange with operations in 40 countries, and summarised a report called Why do people buy cryptocurrencies?

In South Africa 69% of respondents in a survey indicated that they were familiar with cryptocurrencies, while almost a third (29%) said they owned a cryptocurrency. More than half of South African respondents indicated that they are interested in buying a cryptocurrency.

The surprising results are despite a roller-coaster 18 months in which the price of Bitcoin, the world’s largest cryptocurrency, has gyrated from $2 800 (July 21, 2017) to $19 000 (December 19, 2017) to $6 400 (November 3, 2018). It has held this level for the past two months.

Research company Kantar TNS conducted its research across 10 countries – including South Africa, Indonesia, the Netherlands and Germany, Malaysia, the United Kingdom, Ireland, Poland, Italy, Lithuania and Romania – using a sample of 1 000 people in each market balanced across the key demographics such as age, gender, income, geographical region and education level. However, the company noted that the survey was conducted online, which meant that roughly 81% of SA respondents were middle to high-income earners earning R15 000 a month or more.

Bitcoin, the most famous cryptocurrency in the world, was launched in January 2009. The initial users were a handful of enthusiasts and tech geeks. A decade later, regardless of the demographics surveyed, Bitcoin is the clear leader followed by Ethereum, among global respondents. Ripple and Dash emerged as other prominent altcoins (alternative cryptocurrencies) among those surveyed.

Reimagining finance

“The world is currently undergoing a major shift in the evolution of money,” says Marius Reitz, country manager for South Africa at Luno. “The existing financial system was built for a non-digital age but the world now has access to new technologies like decentralised cryptocurrencies. This is enabling us to reimagine the financial system and to upgrade the world to something better.”

The findings suggest that South African consumers are adapting to meet this new financial system head-on. 

Consumers are using their cryptocurrencies for cross-border e-commerce and payments. Some see it as an uncorrelated asset in their portfolio and are holding cryptos for the long term, while others are simply speculating and day trading.

Despite considerable price volatility, respondents from South Africa, Indonesia, and Malaysia reported higher levels of cryptocurrency familiarity and ownership compared to European markets. “We think this is because people seek alternative investments in fragile economies and there is more of a culture of investing in these alternative products,” says Reitz.

It may also have something to do with the fact that Luno launched in these markets in 2014 and has been quite active in educating local markets. The company now has two million clients globally, a million of whom are in South Africa.

Source: Why do people buy cryptocurrencies? A South African perspective.

In Europe people said they did not have enough knowledge to feel comfortable buying and using cryptos. 

Of the South Africans who own a cryptocurrency, the vast majority (83%) see it as an investment, while 23% use it for online transactions and only 12% use it to transfer money to friends and family. While the fall in price has slowed demand, says Reitz, he does not see this as a negative. “This time last year we were overwhelmed. The price has now stabilised and we are seeing forward momentum and growth.”

The uptake of cryptocurrencies has been marginally higher among younger South Africans but overall age has not proven a significant differentiator. This challenges the common perception that younger consumers are more digitally adept and willing to take on greater financial risk, he says.

Although there has been a significant rise in adoption across the globe, there is still a way to go before cryptocurrency becomes a mainstream payments method. Trust and security remain significant barriers to critical mass adoption.

The survey indicates that 48% of South Africans are concerned about losing money when using cryptocurrencies due to a phishing scam or transaction error. They are also worried (47%) about the availability of a trusted supplier of cryptocurrency. Greater stability in the price of cryptocurrency was only the third-highest factor that influenced confidence in the new technology among South African respondents.

The trading and mining of cryptocurrencies is not currently regulated in South Africa, which doesn’t necessarily make it illegal. While cryptocurrency companies are not required to self-regulate, credible players do, which means behaving as though they are fully regulated by applying stringent Know Your Customer and anti-money-laundering processes.

Regulatory vacuum

The South African Reserve Bank (Sarb) has said that it does not consider cryptocurrencies to be currencies or securities. Currently, the bank’s position is that anyone participating in cryptocurrencies does so at their own risk. Sarb deputy governor Francois Groepe has said previously that there is a bit of a regulatory vacuum with respect to cryptocurrencies and initial coin offerings in South Africa. For this reason Sarb is working with regulators through the Inter-governmental Fintech Working Group to review South Africa’s approach to cryptocurrencies.

Many cryptocurrency companies like Luno are also collaborating closely with international governments, financial institutions and regulators to help define policy, share expertise and deliver practical training that will ultimately bring clarity and protection to businesses and consumers.

However, the tax authorities are less retiring. Sars is keeping a close eye on the development of the market and issued a statement earlier this year saying it views cryptos as assets of an intangible nature, and that existing laws apply with respect to tax. This means it’s up to the taxpayer to properly declare cryptocurrency gains or losses.

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I think we can all agree that the findings of the study (with reference to the South African results) are irrelevant from a statistical point of view. The 29% of respondends own crypto not 29% of South Africans.

29% is too high, but the number is higher than one would think. There was a pyramid scheme that was huge in 2015/16 that transacted in Bitcoin, lots of people bought into it.

So if SARB says you participate at your own risk, why should the SA Gov have any rights to your cryptocurrency gains? They have put no systems in place to protect or accommodate cryptocurrency speculators.

Luckily with increased adoption of crypto as a direct means of payment one can sidestep the banking system altogether, always mindful that SARS may claim its share of the barter…

Funny, if there is seemingly so much uncertainty on where the VBS billions went, which should all be traceable in the banking system, then I doubt SARS will be able to make a case for its share of crypto barter transactions…

Lifestyle audit (home & car) is probably SARS only option, but it’s amazing how ones life can improve by spending on things that cannot really be audited, like food and services.

Pay your rightful taxes, rightful…taxes.

This is the weirdest comment I have ever read… “Pay your taxes! But not on crypto…”

If you gain on crypto you experience a capital gain in South Africa that could and should be taxed. I understand the tax burden in RSA is large, but for good reason, given the levels of poverty we have. I understand government needs to sort itself out, but falling tax revenue is only going to add to the problem and not solve it. The SARB wants people to be wary of crypto because it is speculation and not an incoming producing asset that is likely to hold its value in a non-volatile way.

Tax ethics aside, you literally call crypto speculation in your comment, which means all of you gains could even be classified as “winnings” and be subject to a larger rate.

Additionally, if Luno was hacked you would have a much smaller chance of finding your money that we do of finding the VBS money, so that criticism of the existing banking system is flawed.

Please think before you speak in inflammatory ways, and try to appeal to people with carefully constructed arguments rather than baseless comparisons.

After Steinhoff, African Bank and VBS Banks track records, it doesn’t seem like Cryptocurrency is such a risk! Handing your hard earned money to someone else in good faith is risky, no matter what the investment!

Investing in crypto is gambling, plain and simple, hence its appeal to South Africans – who’ve never been shy to have a flutter in their never-ending quest for unearned wealth.

One anecdotal data point…

Exactly a year ago in 2017 cryptocurrency was the hot conversation topic, for both my colleagues as well as friends. Then the tulip (crypto) bubble burst, now no-one is talking about this anymore.

I fully agree with you there. I was the only idiot that did not participate. I was total this year most of them will be dollar millionaires.

Yes, the crypto enthusiasts went very quiet, very quickly.

Correction: South Africans have an appetite for easy money and often display high risk behaviour (be it physical or financial) to satisfy that appetite.

I completely agree. But easy money does not exist … But if we take for example Bitcoin, then the course changes often, and no one knows what kind of course will be in the future. Even after reading a couple of articles here only guarantees you a general concept of cryptocurrency, but no more.

For a start ask Luno to stop spamming my email address and to supply an “unsubscribe me” in their tedious BS emails. Their lack of this simple courtesy is an indication of their style of business.

Today’s Business Day article sums it up nicely:

Perhaps the lead flag-bearer of the negative school is Nouriel Roubini, a professor at New York University’s Stern School of Business.”

“Writing for Project Syndicate, Roubini says its obvious that cryptocurrency is not about “decentralisation and democracy; it is about greed”. That’s obvious since a small group of companies, mostly located in “such bastions of democracy as Russia, Georgia and China, control between two-thirds and three-quarters of all crypto-mining activity. Apparently, blockchain fanatics would have us put our faith in an anonymous cartel subject to no rule of law, rather than trust central banks and regulated financial intermediaries.”

That “Of the South Africans who own a cryptocurrency, the vast majority (83%) see it as an investment, while 23% use it for online transactions and only 12% use it to transfer money to friends and family.” only demonstrates the lack of maturity of the SA market. When discussing the term “investment” here is the definition: Put (money) into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit.

Bitcoin is “speculation”. The forming of a theory or conjecture without firm evidence.

As for all the other financial transactions, Visa and FNB does all of this for me with no risk of capital fluctuation.

And why do people buy cryptocurrencies? For the same reason the bought tulip bulbs.

and rotten milk-the Kubus scheme. Adriaan Nieuwhout reeled the greedy, brain dead suckers in in droves.

@Beachcomber………your comments reveal how little you actually know about crypto

Just because ppl SPECULATED on crypto, how on earth does that INVALIDATE it ?

How about the stock market – ppl have ben SPECULATING on that for DECADES !

So does that speculation invalidate all stock markets too ?????

Jeez, how about applying some basic common sense before going into typical kneejerk reaction about something you obviously know nothing about

Have you actually ever USED cryptocurrency ????

To state the obvious, there’s a world of difference between investing and speculating.

Thank goodness the crypto trolls are still out there …. life would be so dull without you all!

As I explained in my post I use “cryptocurrency” most days with Visa or Snapscan and miraculously my balance doesn’t fluctuate depending on the machinations of cartels.

And actually if you’re REALLY interested in a fiat money free system, here’s one you can join for free and use almost anywhere in the world.

But you won’t – because you buy into the delusion of easy money.

South Africans also have an appetite for Ponzi schemes.

Let’s do some cost comparisons:

Say you want to transfer the (ZAR) value of 1 BTC to the USA, for example into a USD bank account.

The (googled) equivalent of 1 BTC (6,417 USD) this very moment is R91,155………BUT on Luno’s website the same 1 BTC will cost R95,794.

That is a hefty 5% premium! (You’ll pay a premium of R4,6K to transfer 1BTC to another part of the world). It will go the the BTC-exchange account in say USA, and then it can be deposited into a USD-account…plus add the bank costs between BTC-exchange and US bank account on recipient side.

Now, use instead’s website to compare various “money transfer companies”…and the cost ranges from R950 to R1,7K if you EFT the same R91,155 amount of money to a USA account for example (and it includes the forex conversion buy-sell spread), and interbank fees.

Already cryptos are dead in the water, cost wise! (Help me right if I’m wrong(?)

The cost is related to the value people attach to their currency (or the cost to convert the currency). Let me explain, Let us say I have R30K to use to make some money through this opportunity, I transfer it via SWIFT payment to an american bitcoin exchange, it costs me 2-3% forex commission at the bank + R260 SWIFT fees (almost 1%) and I get to wait a week for the balance to show on the other side. I then buy my Bitcoin, withdraw it into the Luno exchange in RSA (costs like $5). So now I have Bitcoin that I can sell but I already incurred 3-4% loss due to the fees paid to the banking system. I now have 1-2% that I can make profit should I sell it assuming the price has not fluctuated. So if I were to export some product eg. fuit to America, and received my payment in BTC I would make an additional 5% since the Rand to USD conversion costs about 4-5%. Once enough people trade in BTC the liquidity would cause the 5% premium to disappear since you do not need to use the banks (and their fees anymore). You could simply buy and sell BTC locally

Appreciate your comment ZNH 🙂

When one side-step the formal banking SWIFT system, and use offshore based “money transfer companies” like CurrencyFair, Xend>Pay, etc (in SA we have “transfer4free”, “Incompass”, etc) the cost in my example is 1,0-1,9% cost (including fees & exchange rate conversion). Fair enough, some of these money transfers takes 2-5 days to clear. Probably way safer than (easier hackable) crypto 🙁

Been thinking, if the whole world uses a single crypto, there WILL be cost involved, just like the formal banking system at present. No one works for free by mining crypto….it costs miners their time, equipment, power, etc.

Hopefully something really useful will morph from blockchain, but I fail to see a single crypto gaining universal acceptance. Yes, 2017 was rather exciting 😉

FAKE NEWS !! The average South African spends 76% of take home pay on debt. Now you tell me where you get your fictitious numbers from??

1 Very simple reason that most dont seem to understand.

Bitcoin (not crypto) has no third party. If you own rand you trust the SA gov, if you own Bitcoin you dont have to trust any third part.

Countries with gov that cant be trusted is why Bitcoin was created and will naturally use it AS THAT IS ITS PURPOSE.

You dont have to own Bitcoin but saying it is a pyramid scheme shows a clear lack how the system works. There is no third party THAT IS THE POINT!

Cryptos remains a controvertial subject. However, I do NOT see it as becoming universally accepted. Not even a single crypto like BTC 🙁

(yes, the world may become a cashless society, with increasing use of smart money-apps, forex-apps, adding into the fray loyalty points-systems….but it will still be in “Fiat” currency relevant for each country.)

In a dream world, for a one-world currency….where a crypto will be ideal (let’s assume BTC is accepted on global scale), the following WILL HAVE TO WORK / or have to apply:

– Remember it will thus replace the formal banking system.
– It will remove all countries’ (i.e. governments’) sovereignty…as the WHOLE globe WILL HAVE TO abide by the…
– same INFLATION of products/service (as a singly crypto the whole world uses will remove the interest rate differential, and forex differential.
– agree to the same economic system (be in capitalism, socialism, communism, tribal system..)
– NO NEED for a government in every country (who the heck is going to provide central services?) The world becomes one country. Everyone will have to agree on the SAME culture, religion, ethics, etc.

– Since there is ONE currency (like BTC) no country/region can be punished (or benefit from) sound economic policy, strict financial discipline, which ties in with inflation/interest rates & exchange rates depreciation (or appreciation) for each country/region.

– It will have to be like a “whole world Europe using one currency”…and using BTC instead of the Euro. In Europe already, there’s so many cultural, socio political differences…where harder-working, efficient countries bailing out the countries with more lazier citizens 😉 or those applying less strict financial discipline. The UK said good-bye recently…

Just imagine mixing Asians (which there any many sub-cultures), Arabs (where do I fit in the Israelis/Jews?), Europeans (that already don’t agree & different cultures), Africans (..a plethora of sub-cultures), Latin America (where the Spanish dialect are different for each country, for starters)….

Just not possible. ONE world currency (whether it be Fiat or Crypto) the whole world’s population has to be the same (in essence in life, economics, culture, business ethics)….otherwise one will see a global breakup, and each region/country will want self-rule / independence from others.

Oh wait…history repeats itself! Already happened! Fast forward from the stone age, the modern world has 180 “fiat” currencies. Why is that? Cannot all humans act the same?? (…and everyone support WP Rugby? or Man United *lol*)

Crypto is merely a pipe-dream of (admittedly brilliant) developers, trying to marry a software program with a global money system. They just forgot “people are different” and need to complete their studies in finance and human behaviour/culture/history.

A single “Fiat” currency for the whole world will not work, and SAME principle applies for any single Crypto. Dead in the water.

If the “Fiat” money system is discarded in favour of BTC….somewhere along the line, you’re going to have a “value differential” (playing the role of Forex in Fiat currencies). Foreign Exchange will just get a different name…that’s all.

This is the REASON WHY you pay a PREMIUM for BTC (as one example) in South Africa in Rand-terms (…and same for other semi-shithole or fully shithole countries 😉 Just a FUNCTION of supply/demand because BTC has not the same value across all world regions. Citizens in the shitholes will naturally pay a premium for it, to buy crypto.

Cryptos will have limited value. 2017 was a “new thing” hype…

Tulips also have value left…it’s nice in a garden & there for the bees to pollinate…

So I hate to break it to you, but we are entering a future where there will be many different currencies, fiat and crypto. Fiat is prone to abuse, fractional reserve banking, debt which is paid either in issuing more debt, or by increasing inflation to devalue the value of the debt. Crypto is not without issues and has many scams going around but at least solves some of the most obvious fiat issues. Since the source code of bitcoin is opensource anyone can use it to create their own coin modelled on the blueprint of bitcoin, many have been created and many will still be created. The difference is that BTC cannot be abused by any political entity and is secured by a network of miners that compete to be first to mine the next block(which consist of all the transactions perfomed on the network). Now I am pretty sure that many different currencies will co-exist and that there will be numerous government crypto-currencies in the future. The future however will mean that banks with their 5% fees are optional and that people will get to decide which system works best for trading across borders. VISA and MASTERCARD might need to lower their fees to stay relevant. And the bad currencies will crumble and cease to exist. Crypto currencies are by no means over, they will slowly but surely disrupt several business models.

Hello ZNH. Have enjoyed your comment, although we will differ. At least there was some constructive talk between us 😉

Note that I’m not again tech….all for it. Disruptive technologies are always welcome, when it reduces cost for users. Where I do not necessarily see cryptos accepted on a global scale, I think the underlying blockchain technology will morph into useful future applications.

People say that BTC and other cryptos cannot be manipulated by politicians, governments, etc…but BTC’s is controlled by miners (people you & I do not now…but somehow is to be trusted). When BTC started, it was mostly controlled (mined for profit) by a few large entities that can afford the power of high-end computing processing. Today the miners are the web, but still, there’s always control by the few wealthy 20% of miners (‘whales’) that own the bulk of crypto.

I must admit, crypto is useful when a person wants to transfer money out of SA (in excess of SARB approval)….but one has to mind the “premium” you pay….which is probably fair, compared to tax on assets.

End of comments.





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