Bitcoin’s Potential As A Disruptive Asset In South Africa’s Economic Landscape

South Africa is often said to be one of the countries at the forefront of Africa’s digital revolution, thanks to its population's growing adoption of cryptocurrencies and a government that’s becoming increasingly receptive to the broader crypto industry.

Among African nations, and indeed the world, South Africa stands out for its high rate of crypto adoption, with around 12.5% of its people claiming to own some type of digital asset. And while the country is still doing so, it’s moving toward legitimizing crypto as an asset and regulating digital currencies.

In 2024, South Africa made the landmark decision to classify "stablecoins" as digital assets, cementing a shift in its attitude towards the eventual acceptance of crypto. With that shift, it can be said that the country is taking a step towards a more inclusive and diversified future, in which the world’s most prominent cryptocurrency Bitcoin will likely become an essential asset for businesses and individuals alike.

Bitcoin as a hedge against the rand

In a recent podcast hosted by Farzam Ehsani, the CEO of South Africa’s leading crypto exchange VALR, one of the country’s most respected business leaders and technologists, Michael Jordaan said Bitcoin can bring a lot of benefits to the South African economy.

Jordaan, who previously served as the CEO of First National Bank and is the co-founder of the Neobank Bank Zero and founder of the investment firm Montegray Capital, is a hugely influential voice in South Africa’s economy. And he’s only too aware of Bitcoin’s potential as a hedge against the volatility of the South African rand.

Businesses and investors have long searched for solutions to the rand’s volatility, and many find that it makes sense to find an alternative store of value. But doing so isn’t always easy. The buying power of the U.S. dollar diminishes over time, and conventional financial instruments like gold, stocks, and bonds are also susceptible to economic fluctuations and global market trends. Bitcoin, on the other hand, is often said to be a kind of "digital gold" that represents a viable store of value, having shown consistent, long-term growth.

Gold in particular is seen as a safe haven, and Jordaan thinks that means digital gold can be an equally viable option for investors. "I think if people are going to have gold, you may also have digital gold, which is Bitcoin," he pointed out.

One reason for this is that Bitcoin still has serious potential for growth in terms of its value, even though its price is currently hovering at around $100,000. Jordaan points to the similarity between Bitcoin and gold but notes that the latter has a much higher market capitalization.

"The ratio is very interesting, the market cap of Bitcoin is about one-tenth of the market cap of physical gold right now," he said. "Many believe that because Bitcoin is the digital gold, there will eventually be a market parity. If so, it's a reasonable assumption that Bitcoin could go up ten times in the future."

An inherently global asset

Bitcoin’s strength as digital gold and a store of value comes from some of its unique characteristics, including its limited supply that’s designed as an anti-inflationary hedge, and also its borderless nature. According to Jordaan, what he most likes about Bitcoin is that it’s an "inherently global asset".

"When I see something that is truly global, I find that very appealing because there are many things that we have to share," Jordaan said. "For example, we share the nature on Earth. And that means there are times when we feel so together, like with the COVID pandemic, when the whole of humanity was threatened by this virus."

His point is that, now and again, something truly global appears and it impacts the whole world equally. The rise of the internet was one of those things, changing the way people work and communicate, and find information.

"When I saw Bitcoin and what it can do and I realized that it’s borderless and decentralized and challenged traditional institutions, I found that very exciting," Jordaan said.

Bitcoin as a collateral

The borderless nature of Bitcoin is perhaps the biggest single factor that has enabled it to grow, generating excitement and loyal "hodlers" in every part of the world. According to Jordaan, it’s going to keep growing until such a time that traditional institutions have no choice but to embrace it. At that time, it will become a much more powerful financial tool, he believes.

To give an example, he said that right now, there’s not a single South African bank that will allow anyone to deposit Bitcoin as collateral to obtain a loan. But he believes that many will probably come to accept it at some point, as its attributes make it an extremely good security.

"It’s a market that’s liquid and trades 24/7 around the world, so in that sense, it’s even better than listed shares," Jordan argued. "I know it's very volatile so you can’t lend 100% against the asset, but this is the kind of awakening that needs to happen."

This kind of utility will only enhance Bitcoin’s value as a possible hedge against the rand, increasing the likelihood of South African investors embracing it.

A tool for treasury diversification

Of course, this also makes Bitcoin very attractive from the perspective of treasury diversification, and Jordaan believes this will be another trend to watch, though it may not make sense for every company.

Citing his background as a "conservative banker", Jordaan said that he always recommends companies pay off their debts first, before they look to diversify their holdings. But for those companies with cash reserves, who are debt-free, he thinks diversification is the common sense strategy, and Bitcoin provides a compelling option.

"Diversification means putting your reserves into more than one currency and one of them can be Bitcoin. I see no reason why it shouldn’t be Bitcoin," he said. "Right now, the only thing that’s holding this back is the uncertainty of accounting standards."

It’s not only companies that are looking to diversify their treasuries, though. Some countries, such as El Salvador and the Central African Republic have also created national Bitcoin treasuries, and there are suggestions that the U.S. is looking to do the same under Donald Trump.

But Jordaan surprisingly doesn’t recommend this course of action for South Africa. While it can be a useful tool for companies, he says South Africa’s government needs to focus its investment on the economy, and making the country grow.

"Rather than build up Bitcoin reserves, we should be investing in real assets and education so that we can grow as a country," he argued. "This debate shouldn’t be a South African debate. It’s one for wealthy countries who feel they don’t have these opportunities to make their economies grow."

Lower-cost payments

As more companies hold Bitcoin reserves, the cryptocurrency will also become more viable as a mechanism to facilitate international transactions. Crypto-based remittances are growing on a global scale, and in South Africa, foreign exchange is an area that’s ripe for disruption given that most existing options are complex and cumbersome.

In this case, though, Jordaan believes Bitcoin will face competition from traditional finance, where companies like his own Bank Zero are focused on making transaction fees zero. He says Bank Zero offers advantages in that it’s built on the traditional banking system and it supports no-cost, real-time transfers, without the complexity that crypto introduces.

"Nonetheless, I think this is an area that can be inspired by what happens in crypto, and the speed at which I can send funds anywhere," Jordaan said. "There may be a role for blockchain in this, in facilitating transactions around the world. What is clear is that the conventional models, where banks charge high fees, are going away. That’s what Bitcoin has shown us."

Disrupting the myth of money

If anyone remains unconvinced of Bitcoin’s disruptive potential, they might do well to remember that we live in a world that’s not nearly as rational as most people think it is. Despite all the advances in terms of civilization and technology, we live in a world that’s perpetuated with myths, and none are bigger than the myth of money itself.

It’s often said that the value of money stems from people’s belief that it’s worth something. But in fact, banknotes are just a piece of paper, and that paper in of itself would be practically worthless, if not for the myth that it has value.

"Money is a myth that we have created, that it has value," Jordaan said. "It’s a very useful myth, but we must remember that myths can change over time."

According to Jordaan, this is what makes Bitcoin such a valuable and attractive concept. After all, it’s a much more advanced and efficient form of money, being anti-inflationary, uncensorable, and much more secure.

"Who is to say that the myth of money that we created in the past will be the same one that we have in the future?," Jordaan asked. "There are many patterns that keep on repeating themselves throughout history, but they do not always come in the same shape or form."