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 institutional-grade 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 pro-regulation 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.

 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 well-managed 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. 

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 advisers.

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 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