More than 3m South Africans trade in crypto currencies on one platform; Bitcoin draws crowds, says Luno

Marius Reitz, Luno’s Africa General Manager, joined BizNews to talk about the explosive growth of crypto currency trading in Africa – and in particular South Africa. Bitcoin’s price could exceed $50,000 over the longer term as the digital asset vies with gold for investment flows, according to cryptocurrency exchange Luno and brokerage OSL. Bitcoin quadrupled last year, eventually reaching an all-time high of almost $42,000 in early January before sliding back. The rally split opinion, with some commentators pointing to increased interest from long-term investors and others citing speculative buying. – Jackie Cameron 

Marius Reitz on Luno:

The company was founded back in 2013 and went through [a] rebranding exercise. The company was known as BitX back in the day. Then in 2017 [we]  rebranded to Luno. Our focus is on making it as safe and easy as possible for people to buy cryptocurrency. So, on Luno, customers can use their local currency – in South Africa or in Nigeria. They can then use that, very easily and safely, to buy cryptocurrency online.

So we make it pretty safe and easy to buy and sell. Customers can also store the cryptocurrency on Luno. It’s still fairly technical, to take custody of your own crypto – even though a lot of people do it themselves. But for first timers, we make it possible for people to store their crypto. More recently, Luno also added a new Bitcoin savings wallet. We’re giving our customers the option to earn interest on the Bitcoin balance. That interest is also paid out in Bitcoin.

Then, of course, also transact. If you look at the reasons or the ways in which people use money, people transact, save or invest [and] people store their money in financial institutions. Then, in future, they will also lend and borrow. We try and cater for all those core areas. We think that in future, people will also use Bitcoin in the same way that they’re using the current currency. That’s the the key focus areas for the business.

The business has been around for seven years. We have a team of just over 400 people. We’ve got offices in Cape Town and Johannesburg, in South Africa. But we are spread out across three continents – Africa, Europe and also South East Asia. We’re also looking at expanding the business across new markets. Last year, in the middle of the lockdown, we also expanded into Australasia. We launched the business in Australia. We have a strong team and we’re very excited about this industry and the growth that we saw in 2020.

On Bitcoin wallets in South Africa:

During the lockdown period – I just had a look at the stats – we added more than two million new customers since the lockdown started last year. It just really shows you that during the lockdown period, it’s a trend that we witness across the world, a lot of new investors or first time buyers into the market. Perhaps as a result of geopolitical issues and financial stimulus programmes being implemented by certain central banks.

We’ve got six million clients. As I said, the company was founded in SA in 2013. So almost half of those customers come from South Africa – at this stage, the majority. But we are seeing good growth in Nigeria. Nigeria actually at this stage is outpacing South Africa, in terms of new account opening. So for the last two or three quarters, Nigeria recorded more account openings than South Africa. We’re also seeing good growth in the UK and Europe at large. 

On regulations surrounding Bitcoin:

I think sometimes people think that crypto exchanges operate completely outside of the realm of regulations. Luno, specifically, is registered with the Financial Intelligence Centre and we’ve been registered with them since 2015. We comply with KYC (know your customer). So that’s customers providing their identity documents and address information before they open an account. We comply with the FIC’s rules. Most credible exchanges or platforms around the world already do some form of self-regulation or they are pro-regulation.

I think while certain aspects of industry is still unregulated, I think most of these platforms – including Luno – already do a lot and do much of the same that you would see from financial institutions, like banks and asset managers.

Over the last year or so, we’ve seen central banks, [like] the South African Reserve Bank and also the Financial Sector Conduct Authority being really proactive and pragmatic. They’ve come out with proposals over the last year. It looks like this year, there will be some form of implementation of proposals. I think the good thing here is that the focus will be on the intermediaries, such as the exchanges, because these platforms have a big responsibility to safeguard customer information and information that customers provide them to open accounts.

They also have a responsibility – a big one – to safeguard customer funds, so when customers send rands to the platforms to buy crypto and store crypto, the company must have the ability – or the capabilities and the expertise – to safely store the funds. At this stage, it’s just too easy for any business to start, and to start accepting money into the custody of customer funds. There needs to be a bit more of a barrier to entry, to ensure that these platforms actually have the capability.

On institutional investors:

Institutional uptake in Africa has been slow. We followed the news in the US [and] we saw the likes of MicroStrategy and a couple of listed companies in the US entering the market last year. That’s a trend that we expect to see in the new year as well. I think it’s just the start. I think many other companies will follow in the footsteps.

On ethereum:

The ethereum price has also shot up. Over the last year, it’s grown more than 500%. Ethereum has a market capitalisation of U$148 billion. I think Bitcoin and ethereum are the main ones – the ones that most cryptocurrency investors will be comfortable with buying. It’s the most liquid, meaning it’s fairly easy to exit your position. There will always be buyers and sellers.

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