With a cryptocurrency ownership rate of 10%, or four million people, South Africa ranks 18th out of 26 countries for crypto adoption according to a recent Finder report. The proportion of crypto owners holding bitcoin sits at 52%, making it the third highest out of 26 countries. The potential in the market for crypto and blockchain to play a significant role in our financial future is huge. So too is the opportunity for businesses in the space to leverage this technology.
At Stitch, we believe one of the most impactful applications for cryptocurrency and its associated technologies is their ability to enable better money movement. This covers a variety of use cases; whether it’s buying and selling crypto, the ability to invest in digital assets, saving funds or performing easier and more affordable cross-border transfers, there are a multitude of benefits that can be gleaned from this relatively new innovation.
Earlier this month, we hosted a virtual panel discussion joined by startup mentor and the Director of Capital Formation and Growth at CV VC Brenton Naicker, Web3 and DeFi expert Gwera Kiwana from MFS Africa, Chairperson of the United Africa Blockchain Association (UABA) Yaliwe Soko, and Yellow Card Country Manager for South Africa Thato Mokoena. Moderated by Stitch Head of Business Development Grant James, the conversation was full of tangible insights and advice on the current landscape, how to raise investment, go-to-market strategies and scaling – plus a whole lot more.
In case you missed it, you can catch up on the full conversation in the video below or keep reading to get the highlights.
South Africa’s leading regulatory approach
The South African Reserve Bank (SARB) recently announced it’s set to introduce new regulations around trading cryptocurrency in the country in the next 12-18 months. The response from prominent leaders in the community has been resoundingly positive. Seeking to enhance consumer protection and encourage meaningful innovation, SARB appears focused on making the space easy and safe to interact with.
Regulatory uncertainty has traditionally made it more difficult for businesses, particularly large-scale corporates, to get involved in the crypto ecosystem. But Naicker believes global shifts and regulatory clarity are going to play a big role in bringing about change: “The regulatory situation has been the biggest barrier for corporates adopting crypto, and financial services supporting the space. Not to mention the ability for startups to attract funding,” he said.
The announcement detailed the requirement for companies offering crypto services to abide by similar standards other traditional financial services follow. This typically involves know-your-customer (KYC) and anti-money laundering (AML) protocols, which work towards ensuring funds moving in and out of the system aren’t fraudulent or linked to criminal activity. Brenton explains:
“It’s very important to have a regulatory framework in place when it comes to investing and moving money. Actual laws to follow will unleash exponential involvement from corporates, and give startups confidence to build in South Africa. We’re going to see an exponential uptick in all things crypto in the country.”
Gwera agrees that South Africa is “leading the way in terms of thoughtful regulation and a measured approach considering utility. In other African countries, like Uganda and Nigeria, measures have been more punitive because they [governments] fear losing money out of their economies.”
Thato echoed these sentiments, highlighting the value Yellow Card places on regulation, as well as consumer education so as to ensure customers are able to interact with the space as safely as possible. He added, “Regulation is great, but people shouldn’t only be protected by the state – they should also be equipped to engage responsibly within the ecosystem.” As part of their ongoing educational efforts, Yellow Card recently partnered with the Crypto University, offering free resources geared towards empowering the crypto curious with knowledge.
Understanding cryptocurrency’s utility in Southern Africa
There’s no doubt cryptocurrency is a revolutionary technology, existing today as the culmination of decades of work trying to improve the way the world transfers value. But for a technology to really have meaning, it needs to be useful to people.
When it comes to utility, Gwera’s believes we can’t yet quite grasp what’s really possible when it comes to cryptocurrencies and blockchain. Despite having surged in popularity over the past few years, these technologies are still in their infancy, and defining the full scope of their utility is near impossible. But the future is exciting, especially in a country like South Africa.
Gwera believes there’s real value in this space where fintech powers the frontend of more traditionally known applications, and decentralised finance (DeFi) powers the backend.
“We’re early in the space, and mass adoption will come from products that are useful to people that they understand in the frontend. The backend is almost obscured from the user, but that’s what powers it.”
Giving an example, Gwera explained that “every company will adopt some type of web3 element. We may not even need to know or understand that they’re using DeFi liquidity pools in the backend to facilitate savings, for example. All we need to know is they’re a savings company.”
The opportunities are vast and encompass everything from digital identity solutions via non-fungible tokens (NFTs) to stablecoins for payment companies and banks. To really see this potential come to life, partnerships are incredibly important in the industry. Thato notes that increasing adoption and awareness involves “working with multiple partners in the ecosystem and speaking to people on the ground.”
Yaliwe shares these beliefs, having spent time engaging with communities to understand their pain points. She explained the importance of these kinds of exercises:
“Sometimes we see things from an aerial view, but at the end of the day, if it only benefits people at the top, it’s pointless. [UABA’s] view is to start at the bottom. The people at the top are always looking at the people at the bottom for adoption, but if we feed the people at the bottom with knowledge, it’ll pass on.”
Commenting on her recent time spent in Zambia, she told us the government was interested in understanding what blockchain could do for the people in the township. “We looked at different categories of people, like spaza shop owners, for example, and how they could accept crypto as a form of payment. We also looked at how blockchain could tackle youth unemployment by teaching new skills. Finally, we looked at women in households, asking ourselves how we could help them and give them an unconditional basic income using crypto.”
Build products people want to use
At the end of the day, for a blockchain-enabled business to truly thrive, real value to the end user needs to be the core focus. Gwera explains, “Build stuff people want to use and need. It doesn’t have to be flashy or cool – there are already so many fads out there, but ultimately people want to use stuff that is useful and that drives adoption and stickiness.”
Thato encourages businesses and entrepreneurs to adopt a continuous learning mindset, saying Yellow Card places a considerable emphasis on “continuously learning within the industry and refining our product so people can consume it as easily as possible. That’s top of mind for us.”
When it comes to raising investment, Brenton sings a similar tune explaining he looks for businesses that are able to solve real, big, problems for African markets. “We want to know that the team coming to us is the right one with the correct expertise to solve the problem they set out. We want to make sure what they’re building isn’t just for blockchain-sake, but solves a big African problem. It needs to be scalable, so we ask: ‘is that a multi-million dollar problem in big markets? Can you solve that problem?’”
His advice to founders is to “be specific in who your team and advisory board is. No one is a master of all trades, so if you’re technical, find someone with strong business development experience. If you’re junior, bring on senior advisors to build a strong team that shows investors you can do what you set out to.” Importantly, Brenton adds , “show us an MVP. We want to see what your product will look like.”
Thato adds that engaging with the existing community and leaders in the space is a great go-to-market strategy for new businesses.
“Each market is different, so engage with regulators, drive community adoption, learn from others in the space and sense-check your assumptions. Always keep the customer or end-user top of mind, and be comfortable throwing non-viable ideas away.”
To get the full story, check out the recording from the panel discussion on our YouTube channel.