Two crypto certainties for 2022: regulation and central bank digital currencies

Luno sees regulation as a long-awaited and positive move for the industry.
Regulation means financial advisors will be able to propose crypto products and services to clients. Image: Luke MacGregor/Bloomberg

Two trends you can count on for 2022: crypto regulation and the arrival of central bank digital currencies (CBDCs).

Also expect to see more formal links between crypto players and financial services companies, according to crypto exchange Luno.

“Globally, we have seen moves to regulate crypto and we anticipate the introduction of a clear South African regulatory regime likely by the end of 2022. Regulatory certainty will have a host of positive spin offs for the crypto sector,” says Marius Reitz, Luno’s general manager for Africa.

Local asset managers are working behind the scenes to design crypto products and solutions in anticipation of regulation.

Previous attempts to list a Bitcoin ETF (exchange-traded fund) 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.

Financial Sector Conduct Authority (FSCA) head of enforcement Brandon Topham tells Moneyweb that regulation is imminent, and somewhat overdue.

Read: FSCA working on regulatory framework covering cryptocurrencies

Luno says in the US, where some degree of regulation is in place for crypto companies, firms like Fidelity, Goldman Sachs and JP Morgan are entering the crypto market and the ProShares Bitcoin ETF (the world’s first Bitcoin ETF) saw record inflows into the fund.

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 advisors will be able to propose crypto products and services to clients. Luno is partnering with such businesses to ensure that customers can enter crypto investments through their trusted financial advisors.

Louis van Staden, global head of payments at Luno, expects to see the launch of more central bank digital currencies (CBDCs) in 2022. “Nigeria has launched the e-Naira and 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,” he says.

Read:

Crypto players 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,” says Van Staden.

Cyber security

Eva Crouwel, global head of financial crime at Luno, says while customers are quicker to report financial irregularities than in the past, incidents such as ransomware and email interceptions have been on the rise since the advent of Covid.

“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,” she says.

Europe is becoming more of a financial crime hotspot, with criminals targeting vulnerable and high-net-worth people in France, Italy, Germany and those living in the larger cities in the UK.

“During 2021, the crypto market experienced new all-time highs and also took some brutal hits,” says Luno in a statement.

“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.”

Read: Crypto will ‘turn the corner in 2022’

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