Bitcoin is attracting investor interest, even as it comes off a record high.
VALR, a Johannesburg-based crypto-currency exchange, has been approved for two additional financial licences, in what is seen as a positive development in South Africa’s regulatory framework for digital assets.
The approvals enable VALR to offer a mix of investments that extends beyond the traditional basket of unit trusts, commodities and currency for the first time in South Africa. It also makes it possible for traders to speculate on the price of an underlying asset without owning it – in this case, Bitcoin.
The Financial Sector Conduct Authority’s (FSCA’s) move forward in South Africa’s regulatory framework comes as there is increased appetite for virtual currencies, with more than 530 000 new customers signing up to Luno in the past 12 months, bringing the platform’s South African user base to over 6.3 million.
Luno now has 15 million customers worldwide at a time when the currency continues to reach record prices.
Currently, Bitcoin is worth R1.9 million a coin, having come off a recent high of just over R2.1 million in the first week of this month due to profit-taking. These prices are based on the conversion of the prices in dollars at this morning’s exchange rate of R17.44.
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In October 2022, the FSCA officially declared crypto assets a financial product.
VALR’s approvals are for Over-the-Counter Derivatives Provider (ODP) crypto trading vehicles, as well as, separately, Financial Services Provider (FSP) services.
Farzam Ehsani, co-founder and CEO of VALR, says: “We’re very excited about introducing more and more products that serve our users.”
The ODP approval enables traders to speculate on crypto assets, although this is inherently risky. With the FSP licence, VALR can provide access to traditional investment assets in addition to crypto, providing a mixed basket.
ITWeb’s research shows that VALR, which has 1.6 million users across the globe, is the first entity in South Africa to offer these categories for crypto assets.
In April 2024, VALR was granted permission by the FSCA to provide financial services in the crypto space, among the first to receive this permission, it says. This enables it to act as a broker in the traditional sense of the word; giving advice as well as make investment decisions on behalf of its clients.
Luno has also recently introduced a new investment vehicle in the form of xStocks, which have seen early success, according to Christo de Wit, Luno’s South Africa country manager. Stock tokens are digital representations of actual stocks, such as NVIDIA, held in custody, recorded on a blockchain.
“Some 19 000 South African customers have so far invested in xStocks with Nvidia (NVDAx) the clear favourite, with over 3 000 customers currently holding the stock. Meta (METAx), the S&P 500 ETF (SPYx) and Apple (AAPLx) are also popular,” De Wit says.
While investment remains the primary use case, Luno Pay, the platform’s payment feature, has processed more than 50 000 completed payments across more than 1 700 merchants since November last year. This represents a transaction volume of over R30 million.
Notably, 70% of Luno Pay users are repeat customers. Though still a small fraction of the total user base, this represents early adoption of crypto-currency for everyday transactions, Luno says.
An FSCA Crypto Assets Market Study, issued in November 2023, found there was significant consumer exposure to crypto assets in South Africa, highlighting the need for effective regulation to ensure investor protection and financial stability.
It also noted that regulation was required because trade in these assets “poses severe challenges” including “money-laundering and other illegal activities”.
