South African teens drop out of school to chase risky crypto dreams

South African teens drop out of school to chase risky crypto dreams

JOHANNESBURG – John first heard about cryptocurrency three years ago, when the teen came across adorable YouTube videos and Facebook posts of other South Africans claiming to have gotten rich overnight with bitcoin.

Inspiration, the 14-year-old downloaded a trading app, lied about his age in order to create an account, and started buying and selling cryptocurrency with his savings.

He quickly made small profits, but with the crypto market downturn this year, John lied again – to his parents, who didn’t know about his business activities – to get money to cover his losses.

“I’ll give it back when I get rich,” said John, who lives in Langaville, a low-income neighborhood east of Johannesburg. He requested that his last name be withheld.

John, who likes to wear T-shirts and jeans, said dozens of teens in his town also trade crypto – hoping to emulate the influencers and crypto experts he follows on YouTube and Instagram.

“I am now coaching other boys in the community,” John told the Thomson Reuters Foundation in a park where he often hangs out with his crypto-trading friends.

“All you need is a cell phone, a bank account and a few dollars, and I’ll show you how to make the big money,” he said, adding that he has about 20 clients who pay him a fee of R300-R400 ($17-$23) to show you how to set up accounts and trade.

South Africa ranks eighth globally in terms of cryptocurrency ownership among the public – 7.1% of its population owns digital currencies in 2021, more than Britain or Brazil – according to the United Nations trade agency (UNCTAD). Ownership is also high in Kenya and Nigeria among African countries.

A recent survey – published this month by financial information firm finder.com – shows that cryptocurrency ownership in South Africa is at 10%, with those aged 18-34 making up 43% of holders.

Although there is no such data on South Africans under the age of 18, more young people are engaging in the hope of getting rich quick, even as authorities and financial experts warn of the dangers of fraud, huge losses and psychological suffering.

Asher J. Ram, a senior lecturer at the University of the Witwatersrand, said young South Africans are choosing to trade cryptocurrency instead of getting a college education and finding a job without fully understanding the risks.

“There is a temptation to make money through cryptocurrency trading which can be very compelling…but with the risks involved and not understanding these risks, it can be very harmful,” said Ram, who researches cryptocurrencies.

Fraudulent schemes

Cryptocurrencies are designed to be free from central financial authorities such as governments and central banks. It allows “peer-to-peer” transfers between users over the Internet without any intermediaries.

While users in crisis regions and unstable economies offer an alternative, their relative anonymity also provides a haven for criminals, extremist groups and sanctioned governments. The recent sharp decline in value has hurt many users.

South Africa’s central bank said last month that it would allow the ownership and circulation of cryptocurrencies, as well as their use for remittances. But it is still lightly organized.

Fraud is a major concern: the founders of the country’s cryptocurrency exchange – Africrypt – disappeared in 2021 after telling customers that their accounts had been hacked. The loss of about $3.6 billion is among the largest crypto losses worldwide.

And in June of this year, a US regulator filed civil charges against a South African man and his company for ordering bitcoin from thousands of people as part of a fraud scheme worth more than $1.7 billion worth of bitcoin.

Tandy Mbamo, a spokesperson for the Crime Investigation Unit, said South African police had warned the public about fraudulent encryption schemes.

“We are investigating the cases,” she said, without elaborating.

According to Ram, young adults like John are more likely to be infected.

“They may not fully understand the technological complexities and lack of regulation in space, and the issues around account hacking and theft,” Ram said.

“They get caught up in making money fast. But they can be taken advantage of and lose all their money,” he said, while also warning of the potential negative mental health effects.

press out

Unknown to his parents – who do odd jobs for a living – John was dropping out of school, browsing YouTube for trading tips and trying to woo more clients with his flashy clothes and a picture of a pile of banknotes on his WhatsApp profile.

When he goes to school, he says he is unable to focus, gets distracted by alerts on his trading app, and is tired of staying up late watching YouTube and TikTok.

Once he was a straight student, John’s grades plummeted. But he still hopes for success.

“In town, life is not that easy – I want to grow my crypto business and make enough profit to start another business,” he said. “I think trading is my future.”

For John and other poor young people in South Africa, well-paying jobs seem out of reach given constantly high levels of unemployment.

Tiamo, 15, said he’s nervous about the ups and downs, and about having to lie to his mother about what he’s doing with his money.

Tiamo, who requested that his surname be withheld, has been in crypto since he received an unsolicited WhatsApp message in March saying, “Did you know that you can redeem up to 85,000 rand in two days?”

He responded, and started chatting with a 19-year-old who helped him set up a cryptocurrency trading account and gave him some advice.

In the first week, Tiamo lost 1,000 rand from his savings. He told his mother that he had been robbed, and since then he has told her more lies and skipped school to trade and try to make up for his losses.

“I’m going to do it right one day,” said Tiamo, who lives with his single mother and two brothers in the Johannesburg town of Kuathima. “My mom struggles to put food on the table. I can’t stop now.”

(Reporting by Kimberly Mutandero; Editing by Rena Chandran and Kieran Gilbert. Please refer to the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, which covers the lives of people around the world who struggle to live freely or fairly. Visit https:// news. trust.org)

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