Crypto As Inflation Hedge: South Africa’s Innovative Approach To Digital Assets

Published 10 months ago
Bitcoin on digital circuit board and graph
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Exploring the emerging trend of using cryptocurrency as a hedge against inflation, highlighting real-world applications and driving economic growth in South Africa.

Cryptocurrencies have had a tumultuous history, often marred by speculation and fraudulent activities. However, the recent decline in public interest has allowed for more realistic applications to emerge, along with appropriate regulation. This maturation of the crypto space has led to an exploration of cryptocurrencies as a potential hedge against inflation.

Ahren Posthumus, CEO of Momint, a tech startup based in Cape Town, believes the reduction in hype has allowed for a focus on real-world projects that are auditable and have a real background. “We’re seeing this [crypto as a hedge against inflation] quite a lot… But not only is it being used as a hedge, it’s also being used as a mechanism to drive the bottom line and solve real problems that South Africa is facing right now,” he says to FORBES AFRICA.

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Another notable advantage of cryptocurrency as a hedge against inflation is stablecoins. Since stablecoins are backed by the US dollar, owning them is equivalent to saving in dollars. Storing funds in USDT or earning in other stable tokens like USDC can help keep finances protected from devaluation.

According to Peter Mureu, Marketing Director at Yellow Card, “The rand has dramatically lost its value over the past decade. From ZAR10 for $1 in 2010 to almost ZAR20 for the same amount now, the purchasing ability of the rand has nearly been cut in half. Investing in crypto, especially USDT will allow for that risk to be halved and increase the ability to purchase alternative power sources to deal with the current power issues/load-shedding. For those earning in USDT, even the lack of power is an easily surmountable problem because the USDT is constantly appreciating regardless of the state of the rand.”

One such problem is South Africa’s current energy crisis. The combination of large tax rebates for investments in renewable energy, coupled with platforms such as Momint, has seen large growth in realistic applications for cryptocurrencies. “Our tokenized, fractionalized solar investments qualify for Section 12 rebates… this is massive,” continues Posthumus.

Lerato Lamola, consultant and crypto specialist at Webber Wentzel, notes that South Africa’s legislative process seems to be in line with this, with the country classifying crypto as a financial product rather than a security. This allows crypto to be managed more easily within the framework of existing financial instruments.

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“South Africa is really focusing on the man in the street,” says Lamola. “South Africa is now focusing more on how crypto is impacting retail consumers.”

Cryptocurrencies and blockchain technology are emerging as potent tools for socio-economic development in Africa, particularly South Africa. By facilitating low-cost remittances and microloans, they’re creating meaningful changes that uplift the economy.

Posthumus sees the burgeoning sector as a vehicle for innovation and economic growth, asserting that cryptocurrencies could engender a more equitable financial system by enabling secure and cost-effective transactions.

In Africa, cryptocurrencies and blockchain technology are no longer theoretical concepts; they have become practical tools driving tangible change. Platforms such as Momint are already realizing this – one such example is the ability for users to fractionally invest in renewable energy projects, allowing investors to generate returns, take advantage of renewable investment tax breaks, and invest in sustainable development.

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Cryptocurrencies in South Africa and Africa are increasingly seen as more than just volatile investments, but as powerful tools.

“The biggest thing for us is about having a product that people can use and understand. It’s about education, and we need to be building that trust with the consumer,” adds Posthumus.