Alec Hogg of BizNews is joined by country head of Luno, Christo de Wit, and Ashleigh Hale, co-head of Corporate at Bowmans in the first episode of this four-part series which demystifies the complicated world of crypto currencies, what exactly they are, their various utilities and how to get involved in the market. The series seeks to simplify questions around the digital asset, the tangibility of its value and the role it it will play in the future. In this educational interview the trio unpack the burgeoning role of crypto currencies as the future of finance. Cryptos and the blockchain that supports them are relatively new technologies and the average joe is often left scratching his head when trying to wrap his mind around exactly what crypto is, and how to access the market, which is known for its volatility. Chris and Ashleigh take us through the regulatory environment of crypto, which has recently been classified as a financial product to protect the consumer. There has been a significant uptake of crypto currencies in South Africa, and as an investor it makes sense to do the research and look to crypto as an investable asset vehicle in your portfolio.
Excerpts from the interview with Christo de Wit and Ashleigh Hale
Christo de Wit on Luno’s global footprint
Luno is currently operating in more than 40 countries globally. So we have a very significant worldwide footprint. Globally at this stage, we are already over 10 million [clients] and growing rapidly. We certainly are a competitor on the global scale. What is significant to keep in mind is that Luno was already established in 2013 so we are getting closer to that ten year anniversary. And for us to be growing at this pace is just another reason that we believe cryptocurrency is definitely the future of finance globally.
Ashleigh Hale on getting into cryptocurrency
I started reading about blockchain and blockchain technology and trying to get to grips and understand what this is all about probably around 2012. I was immediately fascinated by this technology and what it could potentially mean. Obviously crypto was starting out then. I started looking at one of the first things, Bitcoin, and the white paper that established what that currency was about and how it would work on the blockchain. That really got me trying to understand, well, what does this mean from a regulatory and a legal point of view, because back then, with an emerging technology like that, there were very few, if no, regulations. It was really a matter of trying to fit it within existing frameworks, which in many respects did not cater for these emerging technologies and for blockchain.
De Wit on what cryptocurrencies are
As Ashleigh mentioned, it’s a new digital technology. Even though it’s been around for a few years, it’s still relatively new in people’s consciousness. So there isn’t that great understanding around it. So, I tried to explain it in simplest forms. It’s a digital asset that is a store of value and the asset in this store of value can be traded on wallets like Luno. Obviously, there’s the technology that it exists on, which is called the blockchain. In the widest sense of it, there are many different blockchains that exist. This is where the different cryptocurrencies come from like Bitcoin or Ethereum. I always try to keep it as simple as possible because I think that’s the easiest way to break it down.
On storing your crypto
If you have a R100 you can store it in a wallet like Luno. We safeguard the bitcoin or you can even store it in your own private wallet, it can also be an offline wallet, so to speak by making the reference to this R100 that you have in your hand. I think the biggest confusion for people is that because cryptocurrencies are digital, they immediately think it’s not tangible. You don’t have to have a physical representation of something for it to have a store of value. That’s what is so fascinating about it, that R100 that you put under your mattress, you can see it, you can feel it, and you can touch it. But the cryptocurrency in your wallet is just as real as that R100. The only difference is that it is stored in a digital wallet and all the transactions that take place are actually recorded on the blockchain.
Hale on crypto’s growing legitimacy
There are a couple of aspects to crypto assets that make it more difficult to regulate. And that’s because it doesn’t sit in a particular place electronically in the sense that the blockchain is recorded on a series of computers distributed all over the world. There’s not one jurisdiction where you can say a crypto asset sits, for example, and therefore is regulated by. So, it’s kind of a universal asset or a universal currency when it’s used as a currency, and that can make it challenging. We’ve seen this in South Africa. It’s particularly challenging from an exchange control point of view, because when can it be said, for example, that you’ve exported your crypto, because it doesn’t sit in one place or in one country. So, that’s just one challenge that the regulators have had to consider. But certainly you alluded last week – on the 19th of October – from the South African legal point of view – that we’ve taken our first step towards regulating crypto assets; the assets which include cryptocurrencies. I think the idea is to try and refer to it more universally now as a crypto asset rather than a cryptocurrency because they do different things and can be used in different ways. But essentially it is now regarded as a financial product to the extent that financial advice is given in respect of a crypto asset or where a body like a Luno, an exchange, acts as an intermediary, facilitating the trade of these assets. Those providers would now need to be licensed by the regulator, the Financial Sector Conduct Authority. This is a very new development and I think it’s positive, in terms of legitimising the sector and also protecting consumers. I think that’s really behind this move. It is going to be a period of time to try and get the licensing regime into place, so there’s a transitional period into next year for this to take effect.