“Globally, we have seen moves to regulate crypto and we anticipate the introduction of a clear South African regulatory regime likely by the end of 2022. Regulatory certainty will have a host of positive spin-offs for the crypto sector,” says Marius Reitz, Luno’s general manager for Africa.
In the US where regulation allows for entry into crypto, firms like Fidelity, Goldman Sachs and JP Morgan are entering the crypto market and the Proshare Bitcoin ETF (world’s first Bitcoin ETF) saw record inflows into the fund.
In anticipation of local regulations, several asset managers are working behind the scenes to craft crypto products and solutions. Previous attempts to list a Bitcoin ETF on the local stock exchange have not been successful, but the listing of crypto instruments on the JSE will be a watershed moment that will allow asset managers to enter crypto.
Regulation will also boost the number of formal partnerships between banks and crypto companies which will facilitate greater crypto adoption.
Once regulation is finalised, financial advisors will be able to propose crypto products and services to clients.
Louis van Staden, global head of payments at Luno, expects to see the launch of more central bank digital currencies (CBDCs) in 2022. “Nigeria has launched the e-Naira and South Africa is investigating a digital currency. CBDCs are significant because they represent a meeting point between how the technology can be leveraged and a comfortable space for regulators,” he says.
The focus in the payment space is on seamless, fast and safe ways to buy and sell crypto. Van Staden believes that companies will be investigating ways to incorporate familiar tools like cards and mobile money in the crypto ecosystem.
Open banking (where financial institutions share information about customers) is already quite prominent in the UK and Europe. It is quick and information can easily be shared across multiple institutions. Ultimately, systems that make transacting simpler are sure to gain traction.
As crypto adoption grows, people are becoming more aware of the importance of keeping their crypto safe. Eva Crouwel, global head of financial crime at Luno, says that more customers are reporting irregularities more quickly and recognising warning signs as awareness campaigns gain traction.
She warns, though, that cyber-related incidents such as ransomware and email interceptions have been on the rise since Covid-19.
“The shift away from being purely office-bound has its perks, but we are seeing significant vulnerability in corporations which leads to users being tricked into sharing corporate account information or money,” she says.
Interestingly, Europe is becoming more of a financial crime hotspot. “We expect to see higher incidents of financial crime across Europe in 2022. investment scams targeting vulnerable and high net worth people in France, Italy, Germany and those living in the larger cities in the UK are rife,” says Crouwel.
During 2021, the crypto market experienced new all-time highs and also took some brutal hits. Cryptocurrencies are still a new alternative asset class and ongoing volatility is expected. A longer-term view shows crypto keeps its upward trajectory even with occasional massive price drops.