The South African Reserve Bank has added crypto assets and stablecoins to a new financial-stability risk category after custody balances at the country’s three largest licensed crypto asset service providers (CASPs) rose to more than R25 billion.
At the same time, the Reserve Bank and National Treasury are preparing a framework for overseeing cross-border crypto-asset transactions and updating the country’s exchange-control rules to address gaps exposed by the rapid growth of digital-asset activity.
The SARB’s latest Financial Stability Review (FSR), published this week, places crypto assets and stablecoins under a new risk category called “technology-enabled financial innovation”. Although the category encompasses a broad set of innovations, the Bank flagged only crypto assets and stablecoins as sub-risks in this edition.
Another new structural vulnerability in the FSR is the high concentration of South Africa’s financial sector.
During a presentation on Tuesday, Nicola Brink, the head of the SARB’s financial stability department, said structural or perpetual risks are slow-burning risks that will not necessarily disrupt the financial sector over the next 12 months. But over the long term, they can undermine the resilience and the efficiency of the financial sector.
The other structural risks discussed in the FSR are increased geopolitical tension and policy uncertainty, persistently low and inequitable domestic economic growth, deteriorating critical domestic infrastructure, and the impact of climate change on the financial sector.
The SARB says South Africa’s overall financial stability outlook has improved since June because domestic financial conditions eased on the back of lower inflation, a firmer rand, and strong equity market performance.
The fiscal outlook strengthened because of improved tax revenues, the adoption of a lower inflation target, the sovereign credit rating upgrade by S&P Global Ratings, and the drawdown from the Gold and Foreign Exchange Contingency Reserve Account. The removal of South Africa from the Financial Action Task Force’s grey list in October further supported investor sentiment and bolstered resilience across the financial system.
The SARB expects the financial system’s resilience to be sustained over the forecast period to November 2026.
Rising crypto adoption and exchange controls
According to the Review, crypto adoption in South Africa has continued to rise, reflected both in the number of registered users at major trading platforms and the value of crypto assets held in custody.
The Bank undertook a stocktake of the domestic crypto landscape with the assistance of licensed crypto asset service providers (CASPs) Luno, VALR, and Ovex. The number of registered users on these three platforms reached almost 7.8 million at the end of July 2025. The total value of crypto assets held in custody by Luno, VALR, and Ovex increased from under R10bn at the start of 2023 to R25.3bn at the end of 2024. Bitcoin continued to account for the largest share of domestic crypto-asset holdings, followed by Ripple, Ethereum, and Solana.
During a presentation on Tuesday, Nicola Brink, the head of the SARB’s financial stability department, said the Bank has added technology-enabled financial innovation as a broad risk category “under which various aspects are monitored”. This FSR focuses on crypto assets, although the SARB monitors many areas of financial innovation, on which it will report in future editions.
The Review highlights crypto’s borderless nature as a source of potential vulnerability because it provides avenues to circumvent the Exchange Control Regulations.
According to the Bank, on-chain analysis confirms that since 1 January 2019, the top 10 domestically hosted Bitcoin wallets have processed almost R63bn in outward volume to wallets hosted outside South Africa. If more wallets were tracked and other crypto assets included, the number would be much higher.
The SARB is working with National Treasury to issue a framework for overseeing cross-border transactions involving crypto assets. At the same time, officials are reviewing and updating the Exchange Control Regulations, to align them with these developments and include crypto assets explicitly.
The Review notes that the Intergovernmental Fintech Working Group has already issued several recommendations aimed at addressing gaps in the exchange-control framework exposed by crypto-asset activity.
Structural shift towards stablecoins
A key structural change since 2022 has been the increasing role of stablecoins in crypto-asset markets. Whereas Bitcoin and other unbacked crypto assets had previously been the primary conduit for trading activity, US dollar-pegged stablecoins have emerged as the preferred trading pair on South African platforms. Trading volumes in these stablecoins have grown significantly, from less than R4bn in 2022 to almost R80bn in the year to October 2025. According to the Review, this shift has been driven in part by the markedly lower price volatility of stablecoins compared with unbacked crypto assets.
Activity in rand-pegged stablecoins has followed a different pattern. The monthly value of on-chain transactions peaked at more than R250 million in November 2023, declined sharply throughout 2024, and began rising again in 2025. Although the current level of on-chain stablecoin activity remains relatively modest, the Review says the figure is expected to increase as the stablecoin payment use case develops.
The Review also links the growing use of stablecoins to possible financial-stability implications, citing payments and settlements as an important transmission channel. It notes that without transparent, consistent and reliable data on crypto assets – including data on their adoption, usage patterns, and interlinkages with the traditional financial system – risks may build up undetected. This lack of data, combined with existing gaps in the domestic crypto-asset regulatory framework, is identified as a vulnerability. These gaps include the absence of prudential requirements for domestic CASPs, as well as for stablecoin issuers and operators.
International regulatory alignment
In July 2023, the Financial Stability Board (FSB) published an overarching framework containing two sets of high-level recommendations: one set relating to the regulation, supervision, and oversight of crypto assets, and another covering global stablecoin arrangements.
In October 2025, the FSB published the findings of its review of member and selected non-member jurisdictions’ progress in implementing these recommendations. South Africa was assessed as having “no framework in place” for the regulation of global stablecoin arrangements and “partial regulations in place” for crypto assets.
The SARB states that the vulnerabilities associated with crypto assets will likely continue to increase until gaps in the domestic regulatory framework have been addressed.
Concentration as a structural risk
The Review describes South Africa’s financial sector as “very concentrated”, particularly in banking, where the six largest banks account for more than 90% of sector assets – a situation that has persisted for more than a decade.
The FSR cites the Herfindahl-Hirschman Index (HHI) as the standard measure for assessing concentration. An HHI value above 0.2 reflects very high concentration; between 0.15 and 0.2 indicates high concentration; between 0.1 and 0.15 denotes moderate concentration; and below 0.1 indicates low concentration. The HHI for the South African banking sector, at above 0.18, confirms its high level of concentration.
Compared with banking, the insurance sector is less concentrated. The five largest life insurers and the five largest non-life insurers account for more than 70% and 40% of their respective markets. The Review attributes this to the insurance sector’s ability to accommodate a wider variety of business models, which has encouraged the entry of smaller players and contributed to greater competition.
Concentration in the life sector has gradually declined, with the HHI falling from 0.125 to 0.119 over the past decade, while the non-life sector consistently shows the lowest levels of concentration.
In her presentation, Brink said that high concentration increases systemic vulnerability because it “contributes to some institutions becoming too big to fail” and “leads to rapid and widespread contagion of distress events throughout the financial system”. She added that the risks are mitigated through measures such as risk-based supervision, stress testing, South Africa’s resolution framework for too-big-to-fail institutions, work on interconnectedness, and crisis preparedness.
Structural constraints and the challenge for new entrants
The Review also links concentration to broader economic trends. It notes that prolonged economic stagnation can lead to increased risk-taking and a reduced product offering by financial institutions as they attempt to defend profit margins. In addition, chronic low and inequitable growth and high unemployment make market entry difficult for new institutions.
Brink pointed to demographic and fiscal data to illustrate this point. The number of assessed taxpayers has remained relatively stable over the past decade, while the number of social-grant recipients has risen from about 15 million to 25 million since 2014.
She said that if assessed taxpayers are taken as a proxy for individuals able to participate actively in the formal financial sector, the implication is that the client base does not grow in line with the population. As a result, as more financial institutions rely on a shrinking portion of the population, any increase in market share by one institution occurs at the expense of others. This dynamic makes it difficult for new entrants to obtain sufficient market share and compete profitably with established institutions.
