Crypto in South Africa: Hype, risk, or the next asset class?

When will crypto be a conventional component of a South African’s investment portfolio?

Few questions put to financial advisors generate more mixed reactions than those about cryptocurrencies. On the one hand, headlines suggest that investors who ‘got in early’ on Bitcoin are now enjoying extraordinary wealth. On the other, equally striking headlines tell of spectacular collapses, fraud, and regulatory clampdowns.

For South African investors, particularly those nearing or already in retirement, the very notion of holding cryptocurrencies can feel daunting: an asset class you don’t understand, coupled with FOMO (fear of missing out) if others are making fortunes.

Advisors hear both sides of this anxiety:

‘I don’t want my retirement security tied to something I don’t understand.’

‘Are we missing out by being too conservative?’

Both perspectives are valid.  And both are the right starting point for a balanced conversation.

Where crypto sits today

Cryptocurrencies are no longer the niche experiment of anonymous coders.  Major institutions now hold them, some countries regulate them, and a handful even issue central bank digital currencies inspired by the same technology.

Bitcoin exchange-traded funds (ETFs) are now listed in global markets.  Asset managers such as BlackRock, Fidelity, and others have launched products that track or custody digital assets under strict regulatory oversight.  Large payment firms like PayPal and Visa enable crypto-related services.

The point is not that crypto is suddenly ‘safe’ – it remains volatile and speculative – but that it has undeniably matured from its origins.  This shift matters to South African investors, because it changes the lens through which regulators, pension funds, and wealth managers view crypto.

The South African context

Locally, the Financial Sector Conduct Authority (FSCA) now recognises crypto asset service providers.  Exchanges and custodians require licences, and are subject to rules around disclosure, conduct, and client protection.  Tax treatment is clear: profits are subject to capital gains or income tax, depending on your intent and trading pattern.

The South African Reserve Bank (SARB) has studied crypto closely, particularly around payment systems and financial stability.  While SARB has not embraced cryptocurrencies as legal tender, it is monitoring them within the framework of financial integrity, anti-money laundering, and consumer protection.

Still, no South African retirement fund is obliged (or permitted, under Regulation 28) to allocate to cryptocurrencies.  Within discretionary portfolios – those beyond retirement annuities or pension funds – crypto could be considered, but only under the careful oversight of a licensed advisor, and in line with an agreed risk profile.

Crypto in South Africa at a glance 

• FSCA licences required for service providers
• Tax obligations apply on gains
• Regulation 28 prohibits crypto in retirement funds
• Discretionary portfolios may consider small allocations under advice

Comparing crypto to traditional asset classes 

Gold has long been called a ‘store of value.’ It does not yield income, but scarcity and investor trust give it a role in portfolios as a hedge.  Bitcoin, sometimes called ‘digital gold,’ shares some of those qualities: a capped supply, independence from government issuance, and appeal during times of uncertainty.

The key difference lies in volatility. Whereas gold’s price fluctuates but remains broadly anchored to inflation and macroeconomic cycles, cryptocurrencies swing wildly – sometimes doubling in months, sometimes halving in weeks.  Investors need to approach these swings with the same mindset they might approach emerging-market equities: potentially rewarding, but not without risk.

What ‘mainstream’ really means 

For an asset class to become a conventional part of financial planning, several boxes must be ticked:  Regulation and investor protection – South Africa and other jurisdictions have moved decisively in this direction.  Institutional adoption – already well underway, as pension funds in developed markets consider allocations through regulated vehicles.  Liquidity and transparency – Crypto markets are far deeper and more liquid than a decade ago. Price discovery, custody, and settlement infrastructure have improved dramatically.  Role in diversification – still debated.  Some studies suggest low correlation with equities and bonds, but correlations spike in crises, when diversification matters most.

An asset class goes mainstream when there’s: 

• Strong regulation
• Institutional acceptance
• Reliable liquidity
• Diversification benefits

Addressing client fears 

‘I don’t understand it, therefore I don’t want it.’

That is perfectly acceptable.  Good financial planning is not about chasing every asset, but about aligning your portfolio to your goals.  If crypto does not help you sleep at night, it should not feature in your strategy.  The beauty of wealth management is that there are many other ways to achieve growth, manage inflation, and protect income streams.

‘What if I miss the bull run?’ 

FOMO (fear of missing out) is a powerful driver of poor investment behaviour.  Remember the dot-com boom: some investors became wealthy, many more lost fortunes.  A sensible approach is not ‘all in’ or ‘all out,’ but rather acknowledging crypto as a speculative satellite exposure – perhaps a few percent of discretionary wealth, never the core of your retirement plan.  This way, you participate if prices rise, but you are not derailed if they collapse.

Lessons from history

Every decade brings a new asset class that feels unfamiliar at first: listed property funds, private equity, hedge funds, exchange-traded funds. Each was once novel and often mistrusted. Over time, regulatory frameworks, performance records, and investor education helped them integrate into conventional portfolios.

Crypto may follow a similar trajectory.  Or it may not.  The lesson is that patient, evidence-based adoption matters more than speed.  It is far better to be a disciplined investor who misses the first wave of returns than one who rushes in and loses capital needed for retirement.

‘It is far better to be disciplined and miss the first wave of returns than to rush in and lose capital needed for retirement.’

Practical advice for South African investors 

• Start with your goals.  Crypto is not a goal in itself; it is only relevant if it helps you achieve retirement income, preserve wealth, or diversify risk.
• Consider affordability.  Only ever allocate capital you can afford to lose without affecting your lifestyle or long-term planning.
• Insist on regulation.  Use only licensed service providers. Your advisor should verify FSCA authorisations and global custody arrangements.
• Size appropriately.  Think in single digits of your discretionary portfolio – 2-5% at most.
• Review regularly.  Prices, regulations, and technology change quickly.  Crypto exposure should be monitored, not forgotten.
• Avoid DIY speculation.  If you do not understand private keys, wallets, or exchanges, don’t try to self-manage.  Use institutional products or advisor-guided solutions.

A closing perspective

Crypto’s place in your portfolio is neither an inevitability nor a fad to be ignored.  It is an emerging, regulated, and increasingly institutionalised asset class that deserves consideration – but not blind adoption.

For GTC, the question is always the same:  Does this asset serve your plan?  If the answer is yes – and if liquidity, daily pricing, and regulatory oversight are all in place – then a small, measured allocation may be appropriate.  If the answer is no, GTC sits this one out.  At this time GTC continues to assess cryptocurrencies as an inclusive component of a prudently constructed financial plan.  Any crypto allocation by our clients at this stage would need to be outside the realm of GTC’s formal advice.

As with any evolving asset class, we’ll keep you posted as to our prevailing stance.

Ultimately, your financial security rests not on chasing headlines, but on steady, diversified, and disciplined portfolio construction – the same principles that have guided investors through wars, market crashes, pandemics, and now, the crypto debate.