Are SA banks about to enter the crypto market?

The day when you can buy bitcoin (BTC) on your banking app may not be far off.

Moneyweb canvassed SA banks to see if they’re softening their previously hostile attitude to crypto, and it seems they are – particularly in light of licensing regulations introduced by the Financial Sector Conduct Authority in 2024.

Listen/read: Banks are about to enter the crypto space

The banks that responded to our questions say they are exploring various crypto initiatives, but they are taking a cautious approach.

None have taken the plunge just yet, but unofficially we are told at least one major bank is expected to launch a limited crypto offering in the near future. Others will likely follow in short order.

This would be a huge development for SA’s crypto market, given their massive retail reach in a country where the five major banks have more than 50 million bank customers between them – some with multiple bank accounts.

The banks already have a solid reputation in digital custody and security, so offering digital crypto wallets would be a logical step, provided the risks are not too great.

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SA banks were initially dismissive of crypto, which was seen as a poorly regulated gateway for fraudsters such as Mirror Trading International, now in liquidation after roping in more than 32 000 BTC from hundreds of thousands of investors with fake promises of up to 10% returns a month.

With crypto regulations and licensing obligations now in place, the banks are paying attention.

“We are continually looking at broadening our investment offerings in line with our business strategy as well as responding to customer needs,” says Bheki Mkhize, CEO of FNB Wealth and Investments.

“We will consider entering the crypto market if we believe that we can provide a simple, differentiated, easy to use and safe offering for our clients.”

Nedbank says it is currently exploring crypto asset-related initiatives, in response to Moneyweb.

“However, we approach this area cautiously to ensure we continue to meet and protect our customers’ evolving financial needs. At this time, we do not accept any type of crypto payment as collateral against loans. This policy may evolve in the future, particularly with the implementation of less volatile crypto assets such as stablecoins.”

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Says Rob Downes, head of digital assets at Absa Corporate and Investment Banking: “Absa evaluates client and consumer needs, including how and when to offer services that meet their evolving financial requirements, on a continuous basis. At Absa, a dedicated team is currently considering a variety of digital-asset solutions, which Absa will bring to market once completed and approved by regulators.”

Investec declined to comment. No response was received from Standard Bank at the time of going to publication.

The banks are late to the party, with crypto exchanges VALR, Luno and AltcoinTrader having built a core following among the 7-10% of South African adults reckoned to own some crypto. Luno has more than four million South African customers, while VALR – SA’s largest exchange in terms of volumes traded – has more than a million users worldwide.

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Then, there are crypto-licenced over-the-counter desks such as OVEX, FiveWest and 80eight that offer the ability to buy and sell crypto, make payments, and spend crypto at a growing number of merchants.

Crypto providers have muscled in on the banking space by offering payment services such as VALR Pay and Luno Pay that allow customers to spend crypto at outlets such as Pick n Pay and DisChem, which are paid in rands. Crypto providers are able to send funds such as US dollar-backed stablecoins anywhere in the world in minutes, at a fraction of the cost charged by banks.

The financial frontier is moving slowly but inexorably towards crypto, and the banks understand this.

Once SA banks enter the crypto space – following the trend set by the likes of JPMorgan Chase, SEBA Bank in Switzerland, and DBS Bank in Singapore – the market will become a whole lot more competitive and noisier.

Crypto-backed lending

We asked whether the banks are lending to customers against their crypto holdings, or if they plan to do so in the future. None of them do – yet – but that may change. It has been possible to borrow against crypto for years through decentralised finance (DeFi) platforms such as Uniswap, Compound and AAVE, without having to supply either your name or email address.

Binance is a centralised exchange (meaning it is controlled by a single entity, unlike decentralised exchanges), that also offers crypto-backed lending.

In SA, you can borrow money against your crypto through VALR or Geddes Capital. Gianluca Sacco, chief operating officer at VALR, says the loan-to-value ratio depends on the asset used as collateral, but in the case of BTC it is 90%, with funds are available in minutes.

No weeks-long wait for a bank credit committee to decide whether you are worth the risk.

Crypto has upended credit markets, allowing enthusiasts to borrow and increase their holdings, deferring repayments or – in bull markets – retiring the debt out of crypto gains. The danger is that, in a crypto bear market, borrowers may have to stump up additional collateral or risk having their crypto liquidated to repay the loan. On DeFi platforms, this is handled through self-executing smart contracts.

Christo de Wit, Luno’s country manager for SA, says digital assets should be included in the bank’s credit review processes.

“Internationally, crypto-backed loans are gaining traction as lenders increasingly accept digital assets as collateral. While the volatility of digital assets may be a concern, volatility has reduced over the years, and stablecoins are as volatile as the fiat currencies they track. Banks can develop requirements that address crypto price swings.”

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Crypto is no longer a nascent asset class, adds De Wit, noting there is growing demand for digital assets to be accepted as legitimate collateral for credit.  This highlights a clear opportunity to integrate digital assets more fully into the lending ecosystem.

“Because banks are not accepting crypto as a financial asset, the gap in South Africa is starting to be filled by alternative fintech lenders.”

Warren Deats, chief investment officer at Geddes Capital, says many South African entrepreneurs today find themselves crypto-rich but cash-poor. Many of these, particularly in the SME space, would love to use their crypto as collateral to increase borrowings, but the banks aren’t listening.

“Geddes Capital has been pioneering in this space, and we’ve been creative in how we take security. The key metrics for assets suitable as collateral are that they must be liquid, with a clear valuation, and verifiable existence and ownership. Crypto ticks those boxes.

“For us, crypto is a no-brainer in terms of security. The challenges come from the fact that it can be a vehicle for money laundering and illicit transactions, less so today than historically, but it’s still a factor. The challenge is not using it as security; the challenge is ensuring our customers feel comfortable with passing it to our custody, and that we then protect ourselves from hacks and other security breaches.”

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Emma Mer, chief risk officer at FNB, says the bank does not currently take crypto as collateral for credit.

Likewise, Nedbank says it does not accept any form of crypto payment as collateral against loans. However, that policy may change in the future as less volatile forms of collateral, such as stablecoins, present themselves as alternatives to the more risky and speculative crypto assets such as bitcoin and Ethereum.

The message is clear: watch this space.

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