Bitcoin, the best-known digital currency, has risen by roughly 1 000% in five years and more than 6 000% over the last decade
South Africans are slowly joining the global shift toward digital money, as more local retailers and merchants are accepting cryptocurrencies for everyday transactions.
Over the past decade, the value of cryptocurrencies has surged — and fluctuated — dramatically. Bitcoin, the best-known digital currency, has risen by roughly 1 000% in five years and more than 6 000% over the last decade, according to Theoniel McDonald, head of financial planning at Wealth Associates.
“Prices can fluctuate significantly over short periods, which makes the asset class both exciting and risky,” McDonald told the Mail & Guardian.
Cryptocurrencies are digital assets that run on decentralised networks using blockchain technology, allowing people to transfer value online. They aren’t controlled by any government or bank; instead, transactions are verified and recorded on a shared digital ledger, making them transparent, secure and difficult to alter.
Cryptocurrencies are regulated, and should not be considered a “get rich scheme”, or a replacement for the rand, but rather as “an additional tool in the box being offered as an alternative means of transacting and doing business on a day to day basis,” said Kamogelo Mosime, country manager at Yellow Card, a stablecoin payments provider.
A stablecoin is a type of cryptocurrency designed to maintain a stable value — unlike bitcoin or ethereum, whose prices can fluctuate wildly.
“I think a typical misconception is it can be used as a driver of a crime because it cannot be traced when, in actual fact, everything is recorded on that ledger and actually more easily traceable and transparent than your normal sort of currency movements,” Mosime said.
Cryptocurrencies are mainly used to store value and make digital payments. Bitcoin, for example, is often viewed as a digital version of gold because of its limited supply and lasting value.
“From an investment ethos, people are using their general investment ideology focused towards traditional assets to crypto,” Mosime said.
“You’re still seeing diversification portfolio allocation, where investors allocate a small percentage of their portfolio to crypto, to diversify beyond stocks because of those additional benefits.”
In Nigeria, cryptocurrencies are used as a transaction tool fairly extensively because they are considered stable currencies that are seamless and similar to traditional forms of online payment.
“In most practice, the experience feels most like a normal card or QR payment system, except you’re using crypto in the background, and it also almost acts as a currency hedge, because of how sort of more stable and predictable it is in terms of its currency value,” Mosime said.
He added that there are also options to use cryptocurrencies to make international payments as it is a very cheap, instantaneous transfer.
South Africa is, however, behind on adopting the technology for daily use, even though some retailers have introduced and piloted the technology in their payment systems.
Retailer Pick n Pay accepts cryptocurrency through partnerships with platforms like MoneyBadger, Luno, Binance, and VALR, allowing in-store payments via a QR code at any till point. Bootlegger Coffee is another retailer using cryptocurrencies in South Africa.
Experts say the first rule of crypto is simple — learn before you buy. Understanding how digital currencies work is essential before putting money into them. Choosing a reputable and licensed platform is also important.
The future value of cryptocurrencies cannot be entirely predicted, but since they are being adopted into different technologies and being used in different ways, the one truth is that they are here to stay, Mosime said.
“There is no better time to get into it because crypto is not going anywhere. I think we’ve established this. It was definitely not a fad. It’s here to stay,” he said.
“The nice thing about it is that it is unprecedented. We don’t have past behaviours or performances or use cases or valuation trends models to look back on to see what’s going to happen and I think that it’s an opportunity.”