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Price volatility, formal links to the financial services sector - cryptocurrency predictions for this year

Crypto regulation is imminent in South Africa. In addition, ongoing price volatility and more formal links to the financial services sector are predicted for 2022, according to Luno, a South African cryptocurrency exchange. Photo: REUTERS/Benoit Tessier/Illustration

Crypto regulation is imminent in South Africa. In addition, ongoing price volatility and more formal links to the financial services sector are predicted for 2022, according to Luno, a South African cryptocurrency exchange. Photo: REUTERS/Benoit Tessier/Illustration

Published Jan 19, 2022

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Crypto regulation is imminent in South Africa. In addition, ongoing price volatility and more formal links to the financial services sector are predicted for 2022, according to Luno, a South African cryptocurrency exchange.

Luno GM for Africa Marius Reitz said: “Globally, moves to regulate crypto and the introduction of a clear South African regulatory regime are likely by the end of 2022. Regulatory certainty will have a host of positive spin-offs for the crypto sector”.

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Crypto and the formal financial services sector

In anticipation of cryptocurrency regulations in South Africa, several asset managers are working behind the scenes to craft crypto products and solutions. Previous attempts to list a Bitcoin ETF on the local stock exchange have not been successful, but the listing of crypto instruments on the JSE will be a watershed moment that will allow asset managers to enter crypto.

Regulation will also boost the number of formal partnerships between banks and crypto companies, which will facilitate greater crypto adoption.

Once regulation is finalised, financial advisers will be able to propose crypto products and services to clients.

Central banks bringing crypto closer

Louis van Staden, global head of payments at Luno, expects to see the launch of more central bank digital currencies (CBDCs) in 2022.

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“South Africa is investigating a digital currency. CBDCs are significant because they represent a meeting point between how the technology can be leveraged and a comfortable space for regulators,” van Staden said.

Van Staden believes that companies will be investigating ways to incorporate familiar tools like cards and mobile money in the crypto ecosystem.

“Open banking (where financial institutions share information about customers) is already quite prominent in the UK and Europe. It is quick, and information can easily be shared across multiple institutions. Ultimately, systems that make transacting simpler are sure to gain traction.”

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Cryptocurrency security

As crypto adoption grows, people are becoming more aware of the importance of keeping their crypto safe. Eva Crouwel, global head of financial crime at Luno, says that more customers are reporting irregularities more quickly and recognising warning signs as awareness campaigns gain traction.

Crouwel said: “Cyber related incidents such as ransomware and email interceptions have been on the rise since Covid-19. However, the shift away from being purely office-bound has its perks, but we are seeing significant vulnerability in corporations which leads to users being tricked into sharing corporate account information or money“.

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Cryptocurrency prices

During 2021, the crypto market experienced new all-time highs and also took some brutal hits. Cryptocurrencies are still a new alternative asset class, and ongoing volatility is expected. A longer-term view shows crypto keeps its upward trajectory even with occasional massive price drops.

BUSINESS REPORT ONLINE

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