Africa’s largest cryptocurrency exchange is attempting to establish a presence in the United States, becoming the latest international platform to target one of the world’s largest populations of digital-asset investors.
Luno, which is owned by the conglomerate Digital Currency Group Inc., is assessing regulatory regimes in all 50 states to allow for its rollout later this year, according to Marius Reitz, its general manager for Africa.
“It’s more complicated than launching in a single market because of the different states and different regulations within each of these states, so there are a lot of moving parts,” Reitz explained. “However, it is a company priority for us in 2022.”
A number of rapidly expanding cryptocurrency exchange brands, such as FTX and Binance, have entered the US market. According to CB Insights, the world’s largest economy is home to more than half of the world’s crypto unicorns. A unicorn is a private company with a valuation of at least $1 billion.
Luno, which was founded in 2013, has 9 million users from Asia to Africa. It currently trades tokens such as Bitcoin, Ethereum, and Ripple, and Reitz anticipates that it will soon add new coins chosen from the world’s ten most liquid cryptocurrencies.
When selecting a coin, “a lot of the operation time goes into security and custody,” he said.
Adoption of cryptocurrencies
South Africa’s largest cryptocurrency exchange is looking for opportunities in the United States.
Digital Currency Group was the first investor in Luno, acquiring it entirely in 2020, and the company went on to achieve a $10 billion valuation a year later when it raised $700 million in a deal led by SoftBank Group Corp.
Other early backers of Luno included Cape Town-based technology investor Naspers Ltd., Africa’s largest publicly traded company.
So far, the spread of cryptocurrencies in Africa has been concentrated in Nigeria and South Africa, where nearly one-fifth of the population owns some form of digital asset. According to the most recent Finbold data, this compares to a global average of just over 10%. According to Reitz, Luno has also identified opportunities in East Africa, where it already has operations in Uganda.
According to a recent Pew Research Center survey, approximately 16% of Americans have invested in, traded in, or used cryptocurrency.
New Rules and Regulations
Luno is waiting for new regulations in South Africa, which Reitz says are “imminent” and will likely improve consumer protections. The changes should enable platforms such as Luno to attract institutional investors who are currently absent from the market.
The rules may also allow for the inclusion of more sophisticated products. Reitz anticipates cryptocurrency exchange-traded funds, which allow investors to hold a basket of coins without having to purchase them, in a year or two.
JSE LtdSouth Africa’s stock exchange operator, has previously rejected efforts to list crypto ETFs, citing a lack of a regulatory framework in the country.
“We have all these asset managers sitting on the sidelines who want to launch their own crypto products but can’t,” Reitz explained. “As soon as we see regulation, you’ll see a flurry of crypto products offered to South African investors.”
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.