South African Reserve Bank governor Lesetja Kganyago was met with some surprise during a discussion at the World Economic Forum (WEF) in Davos when he questioned the value of a government Bitcoin strategic reserve — asking somewhat glibly why countries don’t have beef or mutton reserves instead.
However, much of what he said during the 45-minute panel was serious, insightful and on point. He repeatedly called for clear and consistent regulation of digital assets or cryptocurrencies, a stance we at Luno — South Africa’s longest-established crypto exchange — wholeheartedly support.
For the digital asset sector to thrive, gain consumer trust and align with global trends, clear regulations are essential. Kganyago’s presence on the panel not only highlighted his stature in global financial circles but also underscored the increasingly mainstream acceptance of digital assets — a key topic at one of the world’s premier business events.
Sitting alongside Brian Armstrong, CEO of Coinbase — a crypto exchange for buying and selling digital assets listed on the Nasdaq — Kganyago represented South Africa and the regulatory work it is doing. His call for sensible regulation, which fosters innovation, was echoed by US financial sector leaders on the panel, who have struggled with a lack of regulatory clarity in their booming sector.
The reluctance of the US Securities and Exchange Commission (SEC) and other bodies to fully regulate the digital assets sector led to a voting bloc of Americans wanting clarity on cryptocurrencies — with President Trump using the issue to attract voters in the recent US election.
Despite a years-long concerted effort by the industry in the US to engage regulators on the topic of sensible regulation, little progress — with an often-hostile SEC — was made. Kganyago sympathised with Armstrong and the other panelists, noting the critical importance of regulators working with the industry to create effective regulation.
Back at home, while some progress has been made, South Africa’s cryptocurrency regulatory framework remains patchwork, with clarity on crucial topics such as exchange control and the listing of exchange-traded products (like ETFs) still missing. Luno is very keen to work with the National Treasury to ensure regulations that allow the economy to benefit from digital assets and ongoing innovation.
BlackRock, the world’s largest asset manager, now offers exchange-traded products that track the value of Bitcoin or Ethereum. These funds have surpassed the value of ETFs tracking gold — a traditional store of value and hedge against stock market downturns — in popularity. There’s now a host of Bitcoin and Ethereum exchange-traded products approved in the US, the UK, Canada, Germany, Brazil and Australia. This shift highlights the growing acceptance of digital assets as a financial mainstay around the world.
Local financial institutions are unable to provide similar products — despite significant demand without certainty about how regulators view digital currencies. In South Africa, clarity is needed on whether assets such as Bitcoin are classified as offshore or onshore assets.
Using Bitcoin to pay for goods will not be viable if every payment is considered a cross-border transaction
To benefit from digital assets, as well as use them as low-cost forms of payment and invest in them through exchange-traded products, cryptocurrencies need to be designated an onshore asset. If cryptocurrencies are listed as offshore assets, pension funds that can only invest up to 45% abroad will have no or limited funds left to allocate, meaning ordinary investors do not benefit from increasingly mainstream digital assets.
Using Bitcoin to pay for goods will not be viable if every payment is considered a cross-border transaction.
Additionally, an amendment needs to be made to the Pension Funds Act, which restricts how much retirement funds can be invested in specific asset classes and excludes cryptocurrency.
Luno has expanded from South Africa into the UK, Malaysia and Indonesia, and services clients in 40 countries, but our local operations could perform better with clearer regulations.
Kganyago also spoke about the growing complexity of digital assets, rapid technological advancements and the need for collaboration between industry and regulators. This is exactly what Luno is committed to doing. In Malaysia, we work with regulators to ensure consumer protection while embracing change and allowing the digital asset sector to flourish, boosting their economy.
For all this progress, regulation is needed and Luno is willing to work with Treasury to ensure fair laws.
As US regulators have discovered, the crypto sector cannot be wished away. We at Luno would welcome engagement with Treasury and the Reserve Bank to establish a framework that provides the sector with the recognition and regulation it needs to thrive.
• Reitz is general manager for Africa and Europe at Luno
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