Cryptocurrencies, which are blockchain-enabled and digitally encrypted representations of financial value, are gaining more prominence among the general populace and have moved beyond solely speculative assets, a survey commissioned by cryptocurrency trading platform Luno says.

Luno South Africa country manager Marius Reitz says the survey, which covered ten emerging and developed countries, and polled 1 000 people in each one, shows that 69% of people in South Africa are familiar with cryptocurrencies and that 29% own cryptocurrencies.

This compares favourably with other markets and, significantly, ownership in South Africa is higher than in developed markets, and is comparable to ownership in Indonesia and Malaysia.

Digital Technologies

“Money is one of the few large-scale systems not yet significantly disrupted by digital technologies, but that is changing and happening in front of our eyes. “Decentralised cryptocurrency is a technology that will enable money to catch up with other information systems affected by changes in technology,” says Reitz.

The current financial system must change to meet the needs of modern people, which includes more efficiency in storing and transferring value, and the reduction in costs to store and transfer value must accrue to the individual, he avers.

Additionally, new services can be developed on the back of new monetary systems, including managing the transfer or investment of money according to an individual’s preferences or risk appetite.

However, key risks remain, including trust and security concerns, as well as price volatility that can erode value, he highlights.

Cryptocurrencies do not eliminate risks associated with monetary systems, such as fraud, but are more suitable for use in a digital economy than the current monetary system, which wholly depends on financial institutions.

Cryptocurrencies are, however, well suited to facilitate the cheap transfer of value between two trusted parties, as evidenced by the ease and traceability of transferring cryptocurrency between two Luno users, he says.

Banking Systems

“You can transfer your Bitcoin or Ethereum to another Luno user’s wallet securely and free. Sending currency to an email address or cellphone number is instant and does not require any financial securities that underpin current banking systems.”

Economies of scale, as with other new services and products, are necessary to improve the financial benefits of the system and meet consumer demands for more efficient representation and transfer of value.

However, despite the challenges of cryptocurrencies, they do allow for more efficient settlement without the need for large capital pools than existing financial transfer systems, says Luno South Africa head of finance Pieter Heyns.

Although there has been a significant rise in the adoption of cryptocurrency worldwide, there is still a long way to go before cryptocurrency becomes a mainstream method of payment. Trust and security remain significant barriers to critical mass adoption, says Reitz.

However, 53% of people surveyed in South Africa are interested in buying cryptocurrency and 74% want to use cryptocurrency to pay in a shop or an online store, he says.

Further, while 83% of South African respondents regard cryptocurrency as an uncorrelated asset to diversify their investment portfolios, 23% use cryptocurrency for commercial and cross-border transaction payments.

Luno has two-million customers worldwide and a team of over 250. Luno Johannesburg will expand its team to 40 people over the next year and will launch its services in 20 African countries over the next year. The Johannesburg office is building a new engineering team to support its African expansion plans, Reitz concludes.