Absa Group Ltd. has become the first African bank to launch institutional digital-asset custody services, as it seeks to tap into South Africa’s growing cryptocurrency market.

The Johannesburg-based lender said the service is being introduced in South Africa for institutional clients, including asset managers, corporates and non-bank financial institutions.

The launch gives Absa a foothold in Africa’s growing digital-asset economy, with the bank considering expanding its custody service to other African markets where it operates.

Absa also plans to broaden access to the service beyond its initial institutional clients in South Africa. Any rollout to additional markets will be subject to regulatory approvals.

“We expect to extend this to other client segments in South Africa in due course, and are actively working on bringing the solution to some of our other African presence countries in line with regulatory approvals required,” Downes said.

Digital-asset custody enables regulated financial institutions to securely hold and administer cryptocurrencies on behalf of customers. Instead of institutions managing the cryptographic keys needed to access their assets themselves, custodians provide the infrastructure to safeguard holdings, process transfers and handle related administrative functions.

“Bitcoin is the predominant asset in custody,” Downes said, adding that the bank is working with clients on “other crypto assets they would like to be custodied in South Africa.”

Absa obtained regulatory approval in South Africa before launching the service. The custody platform currently supports Bitcoin, Ethereum, XRP Ledger and the USDC stablecoin, with additional digital assets potentially to be added as institutional demand grows.

The South African Reserve Bank estimates that crypto assets held by Luno, VALR and Ovex more than doubled to R25.3bn, or about $1.5bn, at the end of 2024, from less than R10bn at the beginning of 2023.

South Africa is not alone among major African economies in developing clearer regulations for digital assets as cryptocurrencies gain wider use for investments, payments and cross-border transactions.

Nigeria has also stepped up efforts to establish a more coordinated regulatory framework covering cryptocurrencies, stablecoins and other virtual assets.