Luno, one of SA’s largest crypto exchanges, continues to make the case for more favourable regulations for the sector, saying an additional R500m could be added to state coffers if digital assets were designated as onshore investments.
Blockchain-based technologies and applications have been gaining traction in Africa’s finance ecosystem, with authorities granting more licences for their use, while adoption from mainstream finance institutions is growing too.
The technology, which powers cryptocurrencies such as bitcoin, had until recently been regarded as fringe and associated with finance scams. But it has since gained market recognition, driven in part by large fund managers such as BlackRock.
Last week, Luno said a simple update of an element of the country’s cryptocurrency regulations to bring it in line with global best practice would generate at least R540m in additional tax revenue for the government.
Digital currencies are not designated as either offshore or onshore assets. That makes it difficult for asset managers to offer products such as exchange-traded funds (ETFs) that track the underlying value of cryptocurrencies.
Luno argues that uncertainty is holding back growth in SA. For the exchange, the incentive is clear. Such a designation would be likely to push up investment locally, thereby increasing demand and trading volumes for a platform such as Luno.
It said growth can be unlocked by an “onshore” designation, as is increasingly being done elsewhere in the world, allowing SA asset managers to participate more fully in the growth of cryptocurrencies through ETF products.
“Digital assets, especially bitcoin, have far outperformed other investments such as stocks and bonds over the past decade on an absolute basis, but local institutional investors are not benefiting from the high returns, ultimately resulting in less money for the fiscus,” Luno noted.
Bitcoin has reached an all-time high of about R2,010,800 which amounts to growth above 1,000% in five years.
SA-born Luno, which has grown to become the country’s largest cryptocurrency exchange, competes with firms such as VALR and AltCoinTrader. It now operates in 40 countries.
In 2020, Digital Currency Group, a US-based blockchain investor, bought Luno from a group of investors that included Naspers and Rand Merchant Investment Holdings.
Luno was the first exchange to make it possible for South Africans to purchase bitcoin in rand.
In making its case around the potential crypto growth profile, Luno highlights the example of BlackRock, which launched a bitcoin ETF in 2024. This has become the fastest-growing ETF in BlackRock’s portfolio, having amassed more than $70bn (R1.2-trillion) in investment, “showing the value and interest in such products.”
In November 2024 UK pension specialist Cartwright was an adviser to that country’s first pension fund to allocate money into bitcoin. The unidentified fund invested 3% of its total assets directly into the cryptocurrency rather than investing in an ETF.
Christo de Wit, country manager for SA at Luno, recently told Business Day the recent bitcoin rally amid persistent trade tensions and geopolitical pressure suggests that digital assets are increasingly viewed as alternative stores of value during periods of traditional market uncertainty.
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