By: Sandy Welch, Acting Editor, MoneyMarketing

Since its inception, there’s one thing that cryptocurrency has proved: it’s not an investment for the faint-hearted. We’ve seen it soar to record highs and then drop to unfathomable lows, as it pulls its investors along for the ride. But is all that about to change in 2024? We spoke to Christo de Wit, Country Manager of Luno, to see his predictions for the crypto market in the year ahead.
At the time of our interview, Bitcoin had just rallied immensely, from $30 000 to over $43 000. It almost touched $45 000. Not record-breaking levels, but the highest it’s been in almost two years. The highest it’s ever reached was November 2021, when it was $69 000.
De Wit agrees that crypto was starting to see real progress in 2023. “We came off a bad year in 2022,” he says, “and that put a dark shadow on the industry. There’s always that notion that crypto has yet to prove itself, but people must remember it’s still new. It’s only been around since 2008.”
Luno is one of those quiet South African success stories. Started by a group of four friends in 2013 when crypto was starting to make headwinds, it was initially called Bit X, and focused purely on Bitcoin. “It was the first local platform where crypto could be traded with South African rand,” says De Wit. “The vision was to put the power of crypto back into everybody’s hands. It’s something South Africans can be proud of.” Today there are branches of Luno in the UK, Malaysia, Indonesia, Nigeria and France. In September 2020, the company was acquired by the Digital Currency Group, the world’s largest blockchain investor.
The platform has around four million South African customers, with half a million new signups in 2023 alone, and since inception has had more than 15 million app downloads. The estimate on how many South Africans in general have used crypto is at around 10% of the population.
“When it comes to positioning crypto for South Africans, our focus is on enabling people to get into it, to make the right decisions, to be educated and to drive sustainable growth. We’re not about creating a bunch of products and features for the sake of it. That’s the biggest thing, having that sense of relevance,” says De Wit.
Why the crypto upswing?
He believes the recent impressive performance of crypto can largely be attributed to impending or recently passed regulation. In South Africa, the FCSA is going through a process of issuing crypto-asset financial service provider (FSP) licences. The successful applicants (there are 74 still in contention, including Luno) are expected to be announced early in the year. De Wit believes this is a positive move. “It brings structure, which is crucial,” he says. “It allows crypto to become an asset class.” It’s what’s needed for the compliance side, and to prevent money laundering and other financial crimes, further protecting consumers”.
“When you are a centralised exchange like Luno, Binance or Coinbase, you have to operate in an environment where you are regulated and have structures and governance measures in place to protect your customers,” says De Wit. “We live in a world where we must adapt to these constructs. It doesn’t mean the power of crypto can’t eclipse the measures and controls of traditional financial markets, but you can’t leap from zero to a hundred. We’ve always been set on taking a slow and steady approach.”
In terms of traditional financial markets, De Wit says when they started engaging with the big asset managers and banks, there’s always been indications that they will start getting into crypto once it is regulated. When crypto was declared a financial product by the Financial Sector Conduct Authority (FSCA) in South Africa under the FAIS Act at the end of 2022, the conversation pivoted slightly, but there was still a need to see the regulation in action.
“However, good news is the sentiment is changing in the US, with ETFs set to be approved early in the year*. This is going to be a significant boost of confidence for the industry, because crypto will now have a seat at the table of traditional financial markets and institutions,” says De Wit.
Luno and financial advisers
De Wit believes that FAs should be advising clients on bringing crypto into their portfolios. “We are playing a more active role in driving education and awareness with FAs. It’s a very big focus for us going into 2024,” he says. “Our advice is to start small. Expose your customers’ investment portfolio to a certain amount of crypto to start with and build on that.
“Our mission is to put the power of crypto into everybody’s hands. It’s a bold and brave statement, but we also want to educate people on what crypto is. We also don’t want FAs going, oh okay, I’ve read an article on Bitcoin, and want to try and push people into it. That’s a dangerous thing to do. We are also very risk-averse. We tell people that it’s a volatile asset, do your own research on the coins you invest in, and never invest more than what you’re willing to lose.”
Not all crypto is equal
Luno currently lists 14 cryptocurrencies on its platform. (There are about 20 000 cryptocurrencies available, but the top 20 have more than 90% of the market.) The company has a coin selection committee and takes a very strict approach to which coins to list. De Wit is quick to point out that just because the coin has approval doesn’t mean it’s guaranteed to bring a positive return. “It’s that the fundamentals behind the coin, the protocols, the managing teams, the strategy have been vetted,” he explains. “It’s not a fly-by-night coin. It’s not a meme coin, which is a coin made for a joke, such as Dogecoin.”
It’s important to understand that different cryptocurrencies have different functions. Bitcoin is still the biggest crypto buy by market cap. “We see that market cap growing even more now that confidence is being restored,” De Wit explains. Ethereum, which is the second biggest crypto by market cap, is often compared to Bitcoin but the utility is completely different. Ethereum enables smart contracts and payments on the Ethereum network. It’s not necessarily there to store value. Bitcoin is also limited.
There will only ever be 21 million Bitcoin in supply, with about 19 million having already been mined. In our lifetimes, we will never see that 21 million being reached, and the supply of Bitcoin is halved every four years with the next one due in April 2024. “If you do the calculations, all the Bitcoin will be mined roughly around 2140,” says de Wit. “That’s what makes it digital gold. It’s limited in supply.”
The impact of scandal
Several high-profile crypto scandals have obviously impacted the industry. Locally, fraud cases within the cryptocurrency sector surged by 25% in the first quarter of 2023, according to Sumsub, a transaction monitoring and verification services provider. De Wit agrees there are some bad actors in the industry but points out it happens in traditional financial markets as well. “People like Sam Bankman-Freid taint the whole industry and drag it down for their own criminal intent,” he says. But it must be noted the issues did not arise due to the business being a crypto company, but rather due to the actions of a fraudster. He operated a business with inadequate corporate governance and corporate controls and he got away with it for a long time.”
How safe is the platform?
With any technology there’s always risk, particularly in the cyberspace. “It’s a big concern,” says De Wit, “but our information security is some of the best in the world. We’ve got measures in place to ensure our platform and our customers’ accounts are as secure as possible. There is, however, also a level of responsibility on the customer’s side.” Luno is constantly working on measures to make the platform even more secure.
The future
Looking ahead, De Wit says that too much attention was given to the Bitcoin price, because of its impact on market activity. “At Luno, we’ve always focused on the long game. We’re not in it for a quick win. There’s a website that tracks the amount of times Bitcoin has been declared dead (it’s currently on more than 400) because every time the naysayers say Bitcoin has died, it just comes back right up. It’s not going anywhere.”
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