The South African government has announced its intention to regulate and explore potential use cases for stablecoins and tokenization in the country in 2024. According to a 2024 budget paper released by the National Treasury Department, the Intergovernmental Fintech Working Group will examine potential use cases and consider appropriate regulatory frameworks for stablecoins throughout 2024.

Stablecoins, digital assets usually pegged to the U.S. dollar or gold, have emerged as the darling of African users in recent years, a sentiment shared by Chainalysis crypto adoption trend report in 2023. Stablecoin’s ability to hedge against weakening currencies, perform seamless and fast cross-border payments, and facilitate foreign remittance is responsible for its widespread use by many African financial institutions.

Unsurprisingly, the federal government wants to understand the technology better, create a working policy, and innovate around it. The working group will conduct analytical work to better understand how stablecoins could potentially be utilized in South Africa and consider appropriate policies and regulations that could govern their use.

The group is also considering regulating tokenization by first measuring its implications on other domestic markets. Tokenization, which represents real-world assets such as company stocks or commodities as digital tokens on a blockchain, has proven useful in solving key problems including land fraud on the continent. By December, the group aims to release a discussion paper outlining the regulatory framework necessary for utilizing tokenization and blockchain-based financial market infrastructure.

South Africa is far along in terms of crypto regulations on the continent, its regulatory clarity might make it the first African country to license crypto companies operating within its borders officially. The Financial Sector Conduct Authority (FSCA) announced it will review crypto license applications on February 13 and March 12, 2024. However, as of now, the outcomes of these reviews remain undisclosed following the initial assessment on the 13th.

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