The number of DeFi users in South Africa is expected to reach 378,000 by 2025, with user penetration projected to remain at 0.62% in both 2024 and 2025, according to survey of market participants by the Financial Sector Conduct Authority (FSCA).
- The majority of respondents (38%) estimated that DeFi’s total value locked (TVL) in South Africa exceeds R500 million (~$27.7 million).
- This was followed by 24% who estimated it to be between R50 million ($2.77 million) and R500 million ($27.7 million), while
- Another 24% were unsure.
- Meanwhile, 10% believed the DeFi TVL in South Africa to be below R10 million ($544,151).
Furthermore, the DeFi market in South Africa was projected to reach approximately $115.6 million in 2024. With an expected annual growth rate (CAGR) of 11.82%, it is anticipated to grow to around $180.7 million by 2028.
Among surveyed participants, 71% identified retail customers as the primary users of DeFi financial services, followed by SMMEs at 19% and larger enterprises at 10%. Given the complexity of DeFi protocols, the current ecosystem mainly attracts crypto-savvy retail investors with a high-risk appetite, the survey determined.
The survey revealed several key use cases for DeFi in South Africa, with:
- Payments leading at 52%, followed by
- Lending and borrowing at 48%, and
- Decentralized exchanges at 33%
Respondents identified the key drivers of DeFi’s future growth as the adoption of crypto assets by mainstream investors (62%) and the rise of new DeFi platforms and protocols (43%).
A major potential outcome of DeFi is the reduction of transaction costs for financial services (57%) as the traditional financial system often involves multiple layers where costs accumulate due to competitive constraints. Additionally, DeFi offers 24/7/365 transaction processing (48%) and no geographic limitations (29%), requiring only an internet connection for access.
However, the immediate benefits of blockchain-based DeFi in South Africa may be limited by regulatory uncertainty, digital illiteracy among a large portion of the population, and rising cybercrime. These challenges could slow widespread adoption.
The survey also highlighted key risks in DeFi, including the potential for coding errors in smart contracts (43%) and dependency risks arising from the interconnected nature of DeFi protocols (33%) where various smart contracts and decentralized applications interact to create new services.
Market participants also expressed concerns that structural flaws within the DeFi ecosystem could pose significant risks to consumer protection and market integrity.
As a result of these risks, FSCA says it will be onboarding certain DeFi use cases onto the regulatory sandbox by the Intergovernmental Fintech Working Group (IFWG) of South Africa in order to gain insights which will help inform regulation and market dynamics.
STUDY | 🇿🇦
“We will consider testing certain #DeFi use cases in @FintechHubSA regulatory sandbox.
This will deepen the FSCA understanding of the potential risks and inform appropriate regulatory and supervisory response.” – @fscasouthafrica https://t.co/1GQVrjKRSc pic.twitter.com/mVTKZhqosa
— BitKE (@BitcoinKE) February 21, 2025
You can find the full survey report here.
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