By Siobhan Cassidy MoneyMarketing contributor
Why it’s hard to just say no to crypto
As anticipated, 2024 has been a pivotal year for cryptocurrencies (cryptos) in South Africa. While the newly regulated asset class is not yet mainstream, investors will increasingly expect advisers and other service providers to have well-informed views on adding crypto to their portfolio or, indeed, excluding cryptos. Cryptos continue to operate in a decentralised environment, but local financial authorities, like those in many other regions, have begun outlining regulatory frameworks. On 1 June 2023, the Financial Sector Conduct Authority (FSCA) started licensing Crypto Asset Service Providers (CASPs). This followed the FSCA’s declaration of crypto assets as a financial product under the Financial Advisory and Intermediary Services (FAIS) Act in October 2022. By mid-2024, 138 institutions had been licensed as CASPs, allowing them to offer financial services related to crypto assets, such as advice and investment management.
Hannes Bezuidenhout, Vice-President for Sales for Africa at Sumsub, a global full-cycle verification platform with more
than 2 000 clients in the crypto, fintech and e-commerce sectors, notes that the classification of crypto assets as financial products “enhances safeguards against fraud, money laundering and terrorist financing”. He adds that this regulation strengthens consumer confidence and attracts institutional investors by adding legitimacy to the market. According to Samukele Mkhize, Head of Compliance for South Africa at Binance, a leading global blockchain ecosystem and cryptocurrency infrastructure provider, this move signals the maturation of the local crypto market.
Globally, digital assets have been reshaping the financial landscape, with prominent figures in the investment world, notably BlackRock CEO and former sceptic Larry Fink, joining the enthusiasts. He has described crypto as a legitimate asset class and compared bitcoin to gold as a store of value, particularly in times of geopolitical risk. As head of the world’s largest asset manager, with assets under management of nearly $10tn, Fink’s endorsement has been a watershed moment for many. His views reflect a broader acceptance of cryptos within global financial circles, similar to the trend emerging in South Africa.
Beyond the potential for impressive returns, one cannot ignore cryptos’ role as a portfolio diversifier, given low correlation with traditional assets, such as stocks and bonds. Some investors see them as a hedge against inflation or currency weakness, factors that are pertinent in South Africa.
The South African Reserve Bank (SARB) maintains that crypto assets are not considered currency, though they are permitted for trading and payments under certain conditions. The SARB’s stance remains a work in progress as it continues to research the role digital currencies might play in the financial ecosystem, including through initiatives like Project Khokha, which is experimenting with tokenised money, blockchains and digital currency.
Medium of exchange
The financial ecosystem has started to integrate cryptos not just as an asset class but also as a medium of exchange. South African retailers are not required to accept only legal tender for transactions; other forms of tender such as loyalty points, vouchers and cryptocurrencies are allowed. Christo de Wit, country manager for South Africa at Luno, a licensed financial service provider and South Africa’s largest crypto investment app, says, “One of the fundamental principles of money is its redeemability. Cryptocurrency is increasingly being treated as more than just an investment.” Luno processed more than R3m in crypto payments through its Luno Pay feature in its
first year, following its launch in September 2023. In early October, the company announced that Luno customers would now also be able to pay with crypto at 31 000 merchants in the Zapper network.
Retail giant Pick n Pay reported in June that it was recording more than R1m in monthly crypto sales after launching the service in late 2023. Through its partnership with crypto payments provider MoneyBadger, Pick n Pay accepts crypto payments at more than 1 600 locations.
Carel van Wyk, MoneyBadger founder and CEO, says, “Crypto payments are cheaper and faster even than card ‘tap-to-pay’, and can be protected with biometric authentication mechanisms to make it highly secure.” Wiehann Olivier, partner and fintech and digital asset lead at Forvis Mazars South Africa, adds that the current transaction charges, a fraction of those charged by traditional payment platforms, is just the start. Describing them as “not bad”, he adds, “The more competition that enters the market, the more you will see a decrease of transaction facilitation fees.” Saying that the effective cost of executing a transaction is probably a fraction of a cent, dependent on the blockchain or second layer application being applied, “we need more players in the game to get that down to its real cost”.
Traditional payment providers, such as banks and credit card companies – which have a more onerous cost base with interbank settlements and reconciliation costs – will be forced to innovate. “The money being spent on financial institutions globally executing transactions on behalf of their customers is in the multiples of millions of dollars. If you could put even half of that money back in the hands of the consumer, it would be fantastic,” says Olivier.
Similarly, foreign workers sending remittances home often lose a disproportionate amount to financial institutions. Olivier asks, “Why is it fair that someone needs to pay 10% of his daily wage to remit funds back to his family?” A Luno report, Bridging Digital and Fiat, highlighted that remittance flows to sub-Saharan Africa reached roughly $54bn in 2023. The World Bank says that in Q4 2023, the average global cost of remittances was 6.9%, with sub-Saharan Africa the most expensive at 7.9%.
Olivier notes that sending money via blockchains or second layer applications costs a fraction of traditional money transfers. He adds that ‘on-ramping’ and ‘off-ramping’ (converting fiat to crypto and vice versa) can add costs, but he hopes that increased investment and expertise will help crypto fulfil its original promise of reducing friction in financial transactions, particularly for the poorest. “When we talk about the uses for crypto in Africa, we generally look at the potential impact on the underserved and
underbanked population, including the migrant workforce, which is significant,” says Olivier.
Common misconceptions
Financial advisers will largely have the concerns of a different cohort on their minds. When it comes to guiding their clients on the ins and outs of cryptos as an asset class, they will have their work cut out, not least regarding tax. One misconception is that blockchain transactions are entirely anonymous and can, therefore, be used to evade tax. Olivier clarifies, “Most blockchains are public ledgers, where all transactions are visible and immutable. SARS may engage with exchanges, request transactional data and use data-matching techniques to trace transactions back to taxpayers.”
They can go back further than five years and crypto asset service providers are obliged to provide information requested by the tax authorities, although this “does not mean that Sars has open access to your cryptorelated assets and transactions held by the service provider”.
“Beyond the potential for impressive returns, one cannot ignore cryptos’ role as a portfolio diversifier"
Another misunderstanding is around what constitutes a taxable event. Many believe that only converting crypto to fiat currency (like South African rand) triggers tax obligations. However, SARS considers any crypto disposal – including trading one crypto for another, or using crypto to buy goods and services – as a taxable event. Depending on the nature of the transaction and the taxpayer’s portfolio, it could be subject to either capital gains tax (CGT) or income tax.
There’s also the belief that cryptos are the currency of choice for terrorism financing and money-laundering. Olivier explains that only a small fraction of blockchain transactions involve criminal activity. “It is probably the worst platform you could use if you’re a criminal because the blockchain is immutable and transparent. You can check every movement, and it is there forever.” He adds, “I think the criminals have come to that realisation over time as well.”
As South Africa’s crypto market continues to develop, it is clear that rejecting cryptos requires as much informed consideration as embracing them once did. Financial advisers must stay updated to guide clients, whether they choose to invest in crypto or avoid it.
Crypto investors and traders must be compliant
Cryptocurrency is subject to all the tax and foreign exchange control regulations fiat currency is, speakers warned during a recent webinar hosted by the Institute of Information Technology Professionals South Africa (IITPSA) Blockchain special interest group in partnership with the Developer User Group.
John Singh, ITPSA Board Vice-Chair and Blockchain Special Interest Group Chair, says, “Crypto enthusiasts believe they should have a fundamental right to own their crypto property. Governments print and control money, so even though people have the fiat money in their pockets, they don’t have complete ownership rights. In the case of crypto, ownership rights are inviolable and are guaranteed by blockchain and cryptography. Regulation is necessary to stop the cases of illegal activities being funded by crypto but it should not violate the property rights of lawful citizens.”
Taxes and crypto
Candice Mesk, director of the Developer User Group, co-organiser of DevConf and a Blockchain enthusiast, notes, “There is no tax implication for buying and holding crypto on a local digital exchange. As long as it’s not being disposed of – for example, exchanging it for another asset, transferring it to someone else, or spending it. The crunch comes when you are disposing of it.” She explains, “The first-in-firstout principle is applied, so the oldest crypto asset will be disposed of first. A gain or loss is calculated based on what the oldest token in your wallet was worth when you bought it, and its value when sold.”
Mesk notes that crypto tax is calculated differently, depending on the intention of the user: “For typical investors, tax is calculated on capital gains and losses, but revenue earned is taxed at the normal income tax rate. If you are paid in crypto, you need to declare that as income. When trading regularly on an exchange, yields may also be considered revenue or income. All earnings need to be declared appropriately and are taxable. SARS expects us all to be responsible citizens about it.”
“Regulation should not violate the property rights of lawful citizens”
She recommends using a crypto tax calculator, “Use a calculator such as Koinly, which can be integrated with many wallets and exchanges, including Luno, to help you generate your tax reports.”
Crypto and exchange controls
On the question of crypto and foreign exchange controls, Mesk says, “South African Exchange Control regulations date back to the early 1960s, and need to come a long way to give robust guidance around crypto. There is a discretionary allowance impact when buying or moving crypto overseas. Currently, a South African resident can’t simply send crypto to a wallet overseas – legally, you need to cash out the crypto assets into rand, then convert them to dollars, euros or other currency, and send that overseas and purchase crypto. This does impact your discretionary allowance. In future, the way we think it’s going is that moving crypto out of South Africa should be considered externalisation of capital, and we expect guidelines to make this clear, as well as reporting mechanisms.”
Crypto is potentially disruptive to traditional cross-border remittance solutions, she says. “Services like Yellow Card and Kotani Pay are seeing phenomenal growth and are licensed in some jurisdictions – so they do fall under regulatory supervision, which gives the assurance that their Know Your Customer (KYC) and Anti Money Laundering (AML) protocols are in order. Crypto is just opening another window for cross-border remittance.”
ETFs for ordinary investors
Mesk also says, “ETFs are very popular with institutional investors, but ordinary investors can access these too”. EFTs bring a certain amount of confidence and stability to the asset class. Companies like BlackRock offering spot crypto ETFs are regulated. It should be noted that as an investor, you don’t have direct access to those crypto assets – an asset manager is taking responsibility for managing those assets.
By Aleks Andjelopolj GM of Product Experience, Luno
How crypto assets are reshaping wealth management in South Africa
As a financial adviser or wealth manager, you may have noticed a shift in the types of conversations you’re having with your clients. Whether it’s high-net-worth individuals looking to diversify their portfolios or retail investors who want to add crypto assets to theirs, crypto assets are becoming a regular feature of financial discussions.
What’s fascinating about this trend is that, for the first time in financial services history, the adoption of an asset class is being driven from the ground up – not by institutional players developing new products and selling them, but by individual investors.
Crypto assets have captured the attention of millions, and South Africa is no exception. Luno is a licensed financial services provider and South Africa’s largest* crypto investment app. With over four million of Luno’s global customers based here, we’re seeing a strong local appetite for crypto. If you haven’t had a client enquire about crypto holdings yet, it’s only a matter of time before they do.
As trusted advisers, it’s essential that you are prepared for this growing interest. Clients want a holistic view of their financial lives, including traditional investments to digital asset holdings. Understanding where cryptocurrencies fit into estate planning, portfolio diversification and long-term wealth management will become increasingly important as adoption continues to rise.
Why are investors so interested?
Cryptocurrencies offer potential as a hedge against inflation and appealing diversification. Retail investors and high-net-worth individuals alike see crypto as an opportunity to spread risk and protect their wealth from economic uncertainties.
We’ve seen market volatility and inflationary concerns driving interest in cryptocurrencies. More recently, thematic cycles, such as the intersection of AI and blockchain and the tokenisation of real-world assets, are driving interest and appetite.
Beyond individual investors, institutional interest in crypto has grown at an unprecedented rate. Major global players like BlackRock have entered the space, launching crypto products and bringing further legitimacy to the sector.
BlackRock’s Bitcoin exchange-traded fund (ETF) became the most successful ETF ever launched, demonstrating the demand for institutionalgrade exposure to crypto assets. Crypto ETFs and similar products are likely to become common inclusions in portfolios, offering exposure to this asset class in a more structured way.
Luno: a homegrown success story
Luno has deep roots in South Africa and has grown into a global leader in the cryptocurrency space. Founded in South Africa just five years after Bitcoin, Luno is one of the oldest cryptocurrency exchanges. After 11 years, it is thriving and serving more than 14 million customers globally. It continues to grow alongside the rapidly evolving crypto assets industry while maintaining a strong proregulation and compliance focus.
Luno adheres to the stringent requirements that govern other licensed financial service providers. From the start, the business built strong compliance foundations, anticipating that regulation would eventually catch up with the world of crypto assets. While crypto remains a relatively new and fast-moving sector, Luno’s experience navigating other regulated markets has allowed it to adopt institutional-grade standards early. This means your clients’ assets are in safe hands; particularly as Luno has never experienced a breach, testament to its robust security practices.
South Africa’s institutional investment community is vast, and there’s significant capital sitting in collective investment schemes. Once crypto becomes eligible for inclusion in these schemes, we can expect a surge in demand from institutional players, further legitimising crypto assets and creating new opportunities for wealth managers and financial advisors.
Luno’s position as a regulated entity gives it a strong foundation to support this next phase of crypto’s evolution. The company has built its reputation on operating within a compliant framework and ensuring that customers’ crypto assets are secure.
What’s next for crypto?
The world of cryptocurrency is still relatively young, but don’t underestimate its growth. Active crypto addresses have tripled since the end of 2023, hitting 220 million in September of 2024.** The most profitable company per employee is not Nvidia or Goldman Sachs, it’s a stablecoin issuer that launched in 2014. This growth and
“If you haven’t had a client enquire about crypto holdings yet, it’s only a matter of time before they do”
The company’s focus on security is key in the custody of crypto assets. There are more than four million Luno wallets in South Africa, where total crypto ownership is estimated at six million in the market, underscoring Luno’s significant reach. Luno is a trusted partner in the local market – many of your clients are likely already interacting with Luno to manage their crypto assets. To provide comprehensive advice, you must understand the platforms your clients use and ensure their digital investments are as wellmanaged and protected as their traditional ones.
The importance of regulation
The regulatory landscape is an important factor that will continue to shape the future of crypto in South Africa. Currently, there are two areas that require greater regulatory clarity. The first area that financial professionals need to be aware of is the classification of crypto assets by the SA Reserve Bank. Confirmation that crypto assets held in custody onshore, by a FAIS-licensed Crypto Asset Service Provider (CASP), are deemed local assets will provide certainty around the application of the Exchange Control Regulations.
The second area is that while cryptocurrencies are currently excluded from the asset classes permitted to be held in collective investment schemes, a shift to a more permissive environment, in line with global financial market leaders like the US and UK, could catalyse increased institutional participation.
the disruption globally are reminiscent of early internet adoption. As new use cases are established and find product market fit, this is set to rise exponentially.
As the landscape matures, regulations continue to accommodate this new asset class, and new products are developed, staying informed will be essential. With eleven years of deep industry knowledge, a licensed financial services provider and a flawless track record of keeping customer funds and information safe, Luno should be the only destination for financial professionals and their clients.
How Luno can help advisers
As a financial adviser, do you find yourself in unfamiliar territory? Does providing advice on something that was on the investment fringe just a few years ago feel uncomfortable? If the answer is yes, just remember that you don’t have to navigate it alone.
Luno can support you and your advisory practice to future-proof. Cryptocurrency is no longer a niche market or a passing trend. It’s here to stay, and it’s time to embrace the opportunities it presents. Interact with Luno and explore the possibilities to help your clients navigate the future of crypto assets confidently.
The future of finance includes crypto assets, and being prepared now will ensure you’re ready for what’s next.
*Source: State of Crypto Report 2024
** In terms of the number of South African customers on Luno’s platform
Crypto as an investment
By Yande Nomvete Operations ManagerAfrica for Binance
Cryptocurrency is rapidly gaining momentum as a recognised form of currency, globally. According to MDPI research, the digital, virtual currency has seen significant traction in countries such as Africa, United States, Australia, UK and some parts of Europe, with Bitcoin remaining the most used, followed by Ethereum. It is moving into a more mature stage of its development, says S&P Global, which is ultimately leading to increased interest in how crypto platforms, and the ecosystem as a whole, can increase the value it offers and its sustainability.
The legitimacy and potential of crypto is having a positive impact on regulatory landscapes in Africa, with many countries showing forwardthinking planning around how the ecosystem can evolve to provide improved economic growth and investment opportunities. South Africa issued its first 100 crypto asset service provider licences, and Kenya has announced their intention to follow suit. With regulations framing the platforms more cohesively, says the Africa Blockchain Report, there is more potential for investment opportunity. In addition, reducing regulatory uncertainty reduces the risk traditionally associated with investment in cryptocurrency as it is important for long-term viability and adoption.
Another key consideration for crypto is its volatility. This is both an asset and a risk factor – the currency has the potential for high returns, something early adopters of Bitcoin and Ethereum benefitted from as they saw their investments multiply many times over. The story of the crypto-millionaire may not be as common today, but it is definitely not out of reach when investments are made wisely and on trusted, safe, regulated platforms. The market has seen an increase in various altcoins and DeFi tokens, which have delivered returns that overshadow traditional investment vehicles.
The potential for high returns is rooted in the disruptive nature of blockchain technology and its applications. These cryptocurrencies are not just speculative assets, they are innovations in finance and digital ownership, and as they continue maturing, they’re offering investors solid returns that have long-term value. However, it is important to remain aware of the volatility of cryptocurrencies. Amid the success stories are failed projects and diminished returns – this makes it key that investors approach the market with a level of caution, and use a platform that provides them with insights that are trusted and relevant.
Binance provides a crypto wallet for traders to store their electronic funds, and is built on trusted foundations that are designed to support investors as they explore different currencies. The platform offers programmes designed to help people make investment decisions – Binance Academy – which are free and accessible to anyone who wants to transform their investment strategies. Providing a deep understanding of cryptocurrencies and the markets, Binance helps investors minimise the risks of volatility and helps them better manage and invest their money.
“Cryptocurrency is changing the shape of investment, providing users with a fresh and innovative way of managing and expanding their funds”
The platform is also secure, which is another key challenge within the crypto investment space. While the technology itself is secure, hacks and scams can affect the wallets and platforms that trade and store cryptocurrencies. The risk of losing funds to unethical actors underscores the importance of using a platform that has invested in its own security. When operating within a compliant platform that’s aligned with security and regulatory expectations, investors can ensure the long-term sustainability of their investments.
While the cryptocurrency investment landscape is a mix of opportunity and challenge, it is a space where anyone can benefit from high returns and an energetic investment portfolio. The trick is to use the right platform and understand the market and its risks. For investors willing to navigate these challenges, the market is more than just a space in which to grow their funds – it is a chance to participate in the future of finance.
Reassuringly Reliable.
WORLD’S #1 CRYPTO EXCHANGE
WORLD’S #1 CRYPTO EXCHANGE
WORLD’S #1 CRYPTO EXCHANGE
WORLD’S #1 CRYPTO EXCHANGE
WORLD’S #1 CRYPTO EXCHANGE
WORLD’S #1 CRYPTO EXCHANGE
By Andrew Ludwig Co-founder
and CEO of Currency Hub
A new era for crypto investors
In a landmark move for South African investors, the Financial Sector Conduct Authority (FSCA) officially brought crypto assets under its regulatory framework in December 2023. This shift is crucial not only for financial advisers and professionals but also signals a new level of security and transparency for retail investors. The recognition of cryptocurrencies as legitimate financial instruments reflects a growing global trend in the financial markets, where digital assets are gaining credibility, especially following initiatives like BlackRock’s recent Bitcoin ETF.
For South Africans, this development mirrors the FSCA’s regulation of hedge funds in 2015, which successfully transformed hedge funds from an exclusive, opaque asset class into one widely understood and accessible. I have seen this evolution firsthand, having been deeply involved in the hedge fund industry, and now applying that same expertise to the burgeoning crypto market.
The importance of FSCA regulation
With FSCA regulation, crypto assets in South Africa are now seen as a more stable and reliable investment class. This offers crucial protection for investors, ensuring higher transparency, security, and accountability for crypto service providers, while reducing the risks of what was once a highly speculative market.
“One of the safest ways for investors to gain exposure to cryptocurrencies without the direct risks of price volatility is through crypto arbitrage”
Crypto Asset Service Provider (CASP) licences now require businesses to meet strict regulatory standards, marking a pivotal moment for the industry. This regulation fosters responsible growth, integrating digital assets into the broader financial market.
For investors, FSCA’s move adds legitimacy to crypto, making it a viable part of diversified portfolios, similar to the maturity seen in hedge funds after regulation.
Understanding the new crypto landscape
The regulatory framework places new responsibilities on financial professionals. Advisers must now understand how cryptocurrencies fit into broader investment
strategies, as digital assets are a rapidly evolving part of finance. The question is no longer if crypto belongs in a portfolio, but how it fits.
Opportunities in crypto range from traditional buy-and-hold strategies to more advanced approaches like crypto arbitrage, which requires a deeper understanding of the asset class and markets involved. Financial professionals who stay informed about regulations and these opportunities will be better positioned to guide their clients effectively.
A secure entry point into digital assets
One of the safest ways for investors to gain exposure to cryptocurrencies without the direct risks of price volatility is through crypto arbitrage. This strategy profits from price differences between markets, allowing investors to benefit without directly holding digital assets.
For South African investors, Currency Hub is the top arbitrage provider in terms of volume and profits. Entering the market in 2017 and becoming the most regulated in 2018, Currency Hub has consistently delivered strong returns. Though market premiums have decreased to 1.5%-3% from earlier highs of 30%, the strategy remains highly profitable. Clients can potentially earn over R100 000 within a few months, depending on the capital invested.
Why Currency Hub is leading the market
Several factors distinguish Currency Hub in the crypto-arbitrage space. Firstly, all associated companies are FSCA regulated (FSP 50850) and authorised CASPs, ensuring compliance with stringent regulatory requirements. This regulation covers all aspects of arbitrage, from strategic forex booking to precise timing of purchases.
Currency Hub also operates through a SARB-approved forex intermediary, enabling clients to fully utilise their R11m annual foreign investment allowance. Clients benefit from Currency Hub’s handling of all aspects of the process, including account setup, liaising with SARS for AIT applications, and booking forex. With the entire process managed online, it’s efficient and removes the administrative burden from clients.
A proven track record of success
Currency Hub’s results speak for themselves. Over the past seven years, the company has conducted more than 250 000 trades, totalling over R25bn in value. They have achieved this without a single loss, due to their comprehensive hedging strategies that
mitigate exposure to foreign exchange and crypto fluctuations. By securing fixed rates for each trade, Currency Hub generates client profits regardless of day-to-day volatility in the rand/dollar exchange rate or changes in the price of Bitcoin.
This hedging solution is key to the success of their arbitrage strategy and, importantly, they trade every day, while most other providers only trade twice per week. Clients are never exposed to the risk of Bitcoin price drops or sharp changes in the forex market, providing peace of mind that their profits are stable and predictable.
Simplifying arbitrage for clients
Another area where Currency Hub excels is in simplifying the arbitrage process. Investors interact only with Currency Hub, rather than needing to coordinate with multiple service providers. In-house accountants streamline the AIT application process, optimising approval timelines and reducing potential delays.
Currency Hub has also built relationships with authorised dealers, such as Capitec, for foreign exchange processing, which further reduces counterparty risk. The company works with institutional-grade OTC desks and exchanges to secure stablecoins, minimising exposure to cryptocurrency price volatility. Clients can rest assured that their investments are handled with the highest levels of security and transparency.
A viable opportunity for financial advisors and retail investors
For financial advisers, Currency Hub presents an excellent opportunity to introduce clients to the world of digital assets in a secure and regulated manner. Crypto arbitrage, underpinned by FSCA oversight, is a relatively low-risk strategy that offers strong returns while minimising exposure to the price volatility often associated with crypto investments.
As the regulatory environment around crypto assets continues to evolve in South Africa, financial advisors who understand the potential of crypto arbitrage will be wellpositioned to guide their clients towards new opportunities that add diversification and growth to their portfolios.
Crypto arbitrage is one of the safest and most effective ways to engage with the digital asset space. With FSCA regulation in place, platforms like Currency Hub offer a highly regulated, efficient, and profitable solution for South African investors. To learn more, visit https://www.currencyhub.co.za and explore the benefits of this proven strategy.
