South African-born crypto-currency exchange Luno is shifting its strategy to target businesses and institutional investors, as well as the individual clients it has supported since launching in 2013.
So says Tarris Arnold, business development manager at Luno, in a wide-ranging interview with ITWeb TV.
During the interview, Arnold describes the impact of the financial services provider (FSP) licences recently issued by the Financial Sector Conduct Authority (FSCA), regulation of the crypto market, anonymity, Bitcoin mining and the crypto winter, among other topics.
Luno was one of the companies to recently receive an FSP licence from the FSCA.
Arnold notes that while the issuing of the licences shut the door on some bad actors in the industry, it has opened doors for Luno to diversify its product offerings to target businesses and institutional investors.
Luno’s strategy shift comes as global firms, such as Microstrategy, are buying Bitcoin en masse. Microstrategy now holds 214 400 Bitcoins at an average purchase price of $35 180 per Bitcoin. It now has over $7.5 billion worth of Bitcoin.
“It’s a very interesting time to be in the crypto space, especially considering how difficult the last two years were,” says Arnold.
“We have to increase clients and some of the products we offer at Luno. We are still passionate about supporting the everyday South African and people around the world starting their crypto journey. But we are also really excited to be more supportive of businesses.”
According to Arnold, for a long time, businesses in SA and globally hadn’t really been able to move into the crypto space, whether from a risk or regulatory perspective.
“We are starting to see that changing. As the licences come through, that opens a lot of doors. We are excited about our ability to now support lots of institutional customers and businesses that want to move into the space.
“Some want to come in from an investment perspective, others maybe have other plans to use it for treasury management and other aspects. We are really excited to start building out and launching products to support that particular group. That will probably be the biggest shift for Luno in the future,” he notes.
The Microstrategy way
He points out Luno is looking to provide the infrastructure and support to businesses. “Some of the businesses that have approached us are looking to go the Microstrategy way – they want to buy lots of Bitcoin and hold it for a long time.
“We are seeing asset managers beginning to offer their customers access to crypto-currencies in a safe and familiar way. So that’s really exciting to have traditional finance players moving into the space to have those offerings.”
He adds that financial advisors are now going to be able to advise their customers investing in crypto, something they were not able to do before.
“A lot of the licences that were provided went to businesses that are already FSPs. For the majority of those, crypto is not part of their core business but they believe there is a lot of opportunity, whether as a long-term asset or speculative investment.”
He explains that Luno went from only operating in SA to now operating in multiple countries across Africa, Europe and Asia, offering a multitude of select and tailored coins.
“It’s been an exciting journey − being part of the industry’s growth and having an opportunity to help provide input on how it grows.”
According to Arnold, the company has about 400 employees in SA, with offices in Johannesburg and Cape Town. Luno is headquartered in London but also has offices in Malaysia, Nigeria, France, Australia and Indonesia.
Across the markets where Luno operates, Arnold says, most customers are turning to crypto because of concerns about inflation in local currencies.
“They want to protect their investments from currencies losing value. Crypto is seen as a necessity in some of those markets. In Nigeria, crypto is hugely adopted; it is seen as part of people’s daily lives, and a lot of that has to do with concerns around the naira. We see that also similarly reflected in SA.”
Big move
The issuing of FSP licences is the largest regulatory move on crypto that SA has had over the year, Arnold adds.
“One would hope this is going to make investing in crypto a lot safer. Unfortunately, there was a slight grey area – there were people that were taking advantage of people that were new to the space.
“Now that there are these licences, it establishes a high standard that all of the players now need to adhere to, and that has put a high barrier to those fly-by-night organisations. It gives us more resources as well; we all now have FSP numbers and that allows you to verify if a company is allowed to operate in that space.”
He points out the licences also provide the FSCA with more options to enforce regulations against bad actors.
“Unfortunately, globally and locally, we have seen the need for greater enforcement. Anyone who is promising returns that seem extremely unreasonable, you must just stay away.
“We often hear of stories of people that will be approached by someone saying they are a trader and if you provide them with R5 000, they will turn it into R50 000 within a month. That’s just unrealistic in the crypto-currency space with the volatility that we have.
“So, going back to the licences, this becomes a way for investors to better identify the legitimate players in the space.”
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