South Africa

South Africa is Turning to Bitcoin to Escape Economic Woes

South Africa is Becoming Bitcoin Friendly

South Africa has experienced a significant increase in bitcoin use. Mati Greenspan, an employee from the eToro crypto-trading company, says that more and more people are turning to bitcoin due to political tensions. According to Mati, “In South Africa, the number of new users trading bitcoin through eToro rose by 671% from January to the end of November last year over the same period in 2016, more than the 574% overall growth”. Although South Africa does not account for the bulk of global cryptocurrency trading, these gains are still noteworthy.

Many Stores Accept Bitcoin

There are quite a few places in South Africa that have been accepting bitcoin for a while. RunwaySale, the country’s largest fashion shopping destination, has been processing payment in bitcoin for several years now. Cape Coffee Beans, an online portal that sells coffee beans, has been accepting bitcoins for quite some time. RC King, an online hobby shop from South Africa, has also been taking bitcoins as a method of payment. These companies must have made a handsome profit by now, assuming they held onto some of their bitcoins.

Possible Reasons Behind Bitcoin’s Increased Use

While it might be a good thing that bitcoin is being more widely used, you may want to know the reasons behind it. Although nobody can assert with 100% certainty as to what the exact reasons might be, we can however take some educated guesses. For instance, in March 2017, South African president Jacob Zuma fired Pravin Gordhan, the country’s finance minister.

This news was not taken well by most investors, both local and abroad, who trusted Mr. Gordhan with making critical decisions related to the nation’s economy. Soon after the finance minister was released from his duties, the South African Rand took a sharp nosedive. It was roughly around this time that South Africa saw a marked increased in bitcoin use.

The country witnessed yet another surge in bitcoin usage after S&P Global Ratings downgraded the country’s fiat currency to BB+, which is pretty much garbage. Although we cannot classify South Africa as a third world country, it has been plagued with rampant corruption and nepotism for quite some time. This has led its citizens to lose faith in the traditional financial system, and bitcoin and other cryptocurrencies could be their way out.

Regulators Stepping In

Whenever countries experience surges in cryptocurrency activity, regulators don’t take much time to start getting involved. Perhaps South Korean regulators have responded the most by cracking down on crypto-trading and other related activities pretty hard. Now, with South Africa experiencing a rise in crypto-activity, its reserve bank along with a few other organizations have began experimenting with regulations, especially since mid 2017. Let’s hope that cryptocurrencies can solve some of African nation’s problems, instead of making them worse.