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Trust issues dominate crypto-currency concerns in SA

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 19 Jun 2019

A lack of understanding and trust is holding South African consumers back from using and investing in crypto-currencies.

This is according to a new report released by cyber security firm Kaspersky: ‘Uncharted territory: why consumers are still wary about adopting cryptocurrency’, which looks into the state of consumers' attitudes towards crypto-currencies.

The report is based on the findings of an online survey of 13 434 consumers in 22 countries, including SA, conducted in October and November 2018.

The report highlights that the rate in which crypto-currencies are being adopted by global consumers is slowing down, mainly because many consumers still lack a comprehensive understanding of how crypto-currencies work.

The majority of survey respondents, 81% of global consumers and 70% of South Africans, admitted to never having purchased crypto-currencies before.

Technical complications

While 34% of South Africans have some knowledge of crypto-currencies, only 19% fully comprehend how they work.

In addition, many people who thought they knew what they were dealing with, later decided against using crypto-currencies. About 14% stopped because it became too technically complicated.

“It is clear that mainstream adoption and growth of crypto-currency is being held back due to the vulnerable nature of the technology,” explains Vitaly Mzokov, head of commercialisation at Kaspersky.

Key findings of the Kaspersky report

* Four in five (81%) have never purchased crypto-currencies.

* Only one in 10 (10%) said they fully understand how crypto-currencies work.

* Over one-third (35%) believe crypto-currencies are a fad.

* Almost one-sixth (14%) of those who are not using crypto-currencies currently would like to in the future.

* Nearly one-fifth (19%) of those using crypto-currencies have experienced hacking attacks on exchanges, and (15%) have been victims of crypto-currency fraud.

“While there is a high appetite to use it, giving your hard-earned cash to something you don’t fully understand, or trust, is a hurdle. With the safety of investments being of paramount importance to consumers, it is vital that they take their own steps to safeguard it. We encourage crypto-businesses to organise themselves effectively to show they are able to protect their customers’ investments.”

This lack of understanding could be leading to mistrust in crypto-currencies’ ability to keep consumers’ money safe, notes Kaspersky.

There is a common perception among consumers that crypto-currencies will not be around forever, adds the firm.

For instance, 35% of South African respondents stated they believe crypto-currencies are volatile and they would need to be stable before the respondents are prepared to use them. Another 17% of locals believe crypto-currencies are a fad not worth bothering about.

While widespread interest in crypto-currencies may have already peaked, there is still a keen interest to use the technology – 22% of those surveyed in SA said, while they are not using crypto-currencies at the moment, they would like to in the future.

“Yet there is still doubt among consumers – often led by a fear that there is a real risk to their finances. Fraudsters can use crypto-currencies to their advantage, with around 5% of those surveyed locally saying they have experienced hacking attacks on exchanges. Criminals also create fake e-wallets to attract people to unwisely invest their money, and 16% of local consumers have been victims of crypto-currency fraud,” notes the report.

A comprehensive report provided by shows the exposure created by insufficient security practices of many crypto-exchanges. This includes some of the top performers in the marketplace, by volume. The site report analysed 100 exchanges that have a daily volume that meets or exceeds US$1 million, and found most have one or more area of security concern.

Emerging market charge

Crypto-currencies have rapidly become one of the most exciting technologies in recent years. The most popular of them all – Bitcoin – soared in value in 2017, leading millions to purchase the currency and set up their own mining farms.

Financial experts are predicting another boom in the near future, perhaps as early as the end of this year.

According to the preliminary findings from Luno’s Future of Money survey, which took the views of more than 7 000 respondents across Europe, Africa and South-East Asia, as large global tech firms start to move into blockchain and altcoins, the most important audience for these firms will probably come from emerging markets.

While there is a high appetite to use [crypto-currency], giving your hard-earned cash to something you don’t fully understand, or trust, is a hurdle.

The survey reveals emerging markets are more likely to exhibit grassroots level adoption, with almost every emerging market country surveyed (over half of respondents) saying they would turn to family, friends or colleagues for financial advice over government organisations.

Marius Reitz, GM of Luno Africa, explains: “As some of the world’s largest tech giants announce they are launching crypto-currency coins, we believe developing markets will be the lead adopters. Our research shows that in these markets, people are more financially savvy because they have to be, which means they need and understand the benefits the new coins can offer.”

When asked the question: “Do you think a single global currency would make the current financial system better or worse?”almost three times as many respondents from SA and Nigeria said it would make it better, compared to the UK.

“Crypto-currency certainly has its benefits but, as we can see, many consumers are still unaware of what they are due to concerns over security and how the technology works,” explains Alexey Sidorowich, head of sales and business development at B2B marketplace software provider, Merkeleon.

“It is an exciting industry to be involved in, but it is one that is built on trust. It is, therefore, imperative that crypto-currency businesses do all they can to protect their networks and ensure their customers’ finances are safe and secure.”

A new report conducted by Bitwise, which examines fake volumes on crypto-currency exchanges, highlights the importance of addressing one of the primary problems of crypto-currency exchanges – transparency.

The report found that around 95% of the crypto-currency exchange volume is likely fake or due to wash trading.