South African Reserve Bank Flags Cryptocurrency and Stablecoins as Financial Risks

The South African Reserve Bank has issued a warning regarding the rising use of cryptocurrencies and stablecoins, highlighting that insufficient regulations could jeopardize the country’s financial stability. This warning comes in the central bank’s latest Financial Stability Review for 2025.

Key Takeaways

The South African Reserve Bank has identified cryptocurrencies and stablecoins as significant risks to financial stability due to their rapid adoption.
Approximately 7.8 million users are registered on the main cryptocurrency exchanges in South Africa.
USD-pegged stablecoins have gained popularity, surpassing other cryptocurrencies as the primary trading pairs.
Lack of regulatory framework for stablecoins and partial regulations for cryptocurrencies can lead to deepening vulnerabilities.
A coordinated national strategy is essential to mitigate the risks associated with the growing crypto market.

South African Reserve Bank flags crypto and stablecoins as financial risk - 1

South African Reserve Bank's Concerns About Crypto

In its second Financial Stability Review of 2025, the South African Reserve Bank has pointed to cryptocurrency assets and stablecoins as a notable financial stability risk. The review highlighted a significant increase in the domestic adoption of these digital assets and noted a rise in the utilization of USD-pegged tokens within local trading markets. As of July, the three largest cryptocurrency exchanges in South Africa had a combined total of 7.8 million registered users, indicating one of the highest levels of retail engagement in the region. By the end of 2024, these exchanges held around $1.5 billion in client assets.

The South African Reserve Bank has raised concerns that the purely digital nature of cryptocurrencies allows users to circumvent the Exchange Control Regulations, which are intended to manage capital inflows and outflows in the country.

Shift in User Behavior

The central bank observed a significant change in user behavior since 2022, with USD-pegged stablecoins surpassing unbacked cryptocurrencies as the main trading pairs on South African platforms. Previously, popular cryptocurrencies like Bitcoin and Ethereum were the most common assets traded. This shift is attributed to the lower price volatility of stablecoins compared to unbacked cryptocurrencies. Despite this change, mainstream coins such as Bitcoin, Ethereum, XRP, and Solana continue to actively trade in South Africa.

In October, the Financial Stability Board also acknowledged that South Africa currently lacks a regulatory framework for global stablecoins and has only partial regulations for cryptocurrencies. The Reserve Bank expressed concern that the absence of clear regulations may allow for vulnerabilities to increase without being noticed.

Regulatory Challenges

The South African Reserve Bank cautioned that until a comprehensive regulatory framework is established, the rapid growth of cryptocurrency activities and the borderless nature of stablecoins could pose risks to the country’s financial stability. This cautious approach stands in contrast to the regulatory advancements seen in other governmental bodies.

In 2022, the Financial Sector Conduct Authority took significant steps by officially designating cryptocurrencies as financial products under South African law, which added licensing requirements for crypto companies. Since then, licenses have been issued to various exchanges and service providers. Notably, in 2017, former deputy governor Francois Groepe expressed concerns about the risks associated with issuing a sovereign digital currency.

The Reserve Bank's analysis highlights the widening regulatory gap as crypto adoption increases. With nearly eight million users engaging in the crypto market and stablecoin activities accelerating, it emphasizes the need for a coordinated national strategy to safeguard the broader financial system against potential risks.