WeeklySA_AdminRECORD: Investors now eyeing the high-flying currency
By Isaac Moledi
Despite South Africa and some policymakers, regulators and central banks around the world not regarding crypto assets as money in the legal tender sense of the word although they perform some of the functions of money, for cryptocurrency investors and Bitcoin (BTC) in particular, 2021 has been a phenomenal and a fantastic year.
In just over a decade, Bitcoin has grown a cult-like following throughout the world and has surged to an all-time high of more than US$ 66 000, which is nearly R925 000. Just five years ago, one could be able to buy one Bitcoin for about US$ 500, just less than R7 000. As of September 30, this year, a single Bitcoin price was more than US$ 43 000, slightly less than R602 000. This is a growth of about 8 600%, according to experts.
Although Bitcoin started this week hovering around US$ 62 000 on Monday according to some Bitcoin trackers, last week Wednesday, the currency set a new all-time high price when it hit US$ 66 974 (nearly R930 000). The currency’s latest record surge coincided with the much anticipated first Bitcoin EFT (electronic fund transfer) debuting on the New York Stock Exchange this week, according to some Bitcoin traders. The cryptocurrency investors believe that the new record is an impressive feat considering just a year ago when the currency hovered around US$ 11 500 per coin.
The cryptocurrency market is described by market experts as a trillion-dollar market, with its overall evaluation found to be around US$ 1, 37 trillion. Although some policymakers, regulators and central banks around the world discourage their citizens to participate in this market, crypto trackers say many investors are trying to get into this market since investing in crypto can potentially be lucrative, especially if one invest at the right time.
One crypto market analyst say for example that if one had invested US$ 1 000 in Bitcoin a decade ago, that investor could have had more than US$ 15 million today, assuming that that investor did not sell his or her investment during that time.
According to recent findings from Chainalysis, Vitnam, India and Pakistan top the list of 20 countries with cryptocurrency adoption – dominating the Global Crypto Adoption Index for the second time in a row. Rather than gross transaction volume, the index rates 154 nations based on peer-to-peer exchange trading activity. Africa’s biggest economy, Nigeria, is also set to launch the country’s digital currency, eNaira, backed by its central bank, as it moves to tap into this lucrative local popularity of crypto and virtual money.”The launch of eNaira,” according to the country’s central bank as quoted on its Facebook, “is a culmination of several years of research work done by the Central Bank of Nigeria.” Five other countries on the African Continent, including Ghana are also expected to follow in Nigeria’s footsteps, by producing their own digital and virtual currencies.
From Bitcoin and Ethereum to Dogecoin and Tether, there are thousands of different cryptocurrencies, which can make it overwhelming when you are first getting started in the world of crypto. The top five cryptocurrencies based on their market capitalization or the total value of all the coins currently in circulation as of the end of September this year are Bitcoin (with a market cap of more than US$821billion), Ethereum (with a market cap of more than US$333 billion, Tether (with a market cap of over US$68 billion) Cardano (with a market cap of over US$67 billion and Binance Coin (with a market cap of over US$61 billion).
Despite the new record high, Bitcoin trackers still believe that the currency is still a high volatile and speculative investment. They say the last time when the crypto experienced a record high in mid-April this year, it abruptly lost over half of its value and plunged to around US$ 30 000 by mid-July.
The advice from experts is that investors should not get excited as the increase does not guarantee a long-term reversal given the crypto’s history of volatility. “Bitcoin’s price is just as likely to fall back down as it is to continue climbing,” one tracker said, recommending those who invest in cryptocurrencies, that they should keep their crypto investments to less than 5% of their total portfolios.
The second biggest economy in the world after the United States, China, which is known to have banned the trading of cryptocurrencies in its economy, is said to be planning to reverse its ban on bitcoin mining. This, predict the experts, is likely to make Bitcoin price to soar to another all-time high of US$ 220 000.
As for South Africa, the country still maintains its stance in its position paper on Crypto Assets. According to Olaotse Matshane, chairperson of the Intergovernmental Fintech Working Group (IFWG), a crypto asset regulatory working group established in 2017, crypto assets’ viability as a widely used means of payment remained untested and an open question, although the market demonstrated significant resilience over the last decade.
Matshane said the IFWG as a regulatory body, still share and reiterates the stance similar to other policymakers, regulators and central banks around the world who maintain that crypto assets are not money in the legal tender sense of the word, although they perform some of the functions of money.
While defusing any ban on cryptocurrencies in the local economy, Matshane said however that her regulatory working group agreed that crypto assets cannot remain outside of the South African regulatory preview, recommending that the country employs a staged approach to bring crypto assets within the regulatory remit through the regulation of crypto asset services providers (Casps).
But the IFWG, she said, will always aim to promote responsible innovation without unduly advantaging or disadvantaging either incumbent market participants or new entrants, thereby ensuring a level playing field for all participants.
To this end, Matshane said her regulatory working group position paper made various recommendations, some of which are already underway and in the process of being implemented, and some of which will take longer to implement, with the ultimate objective of bringing crypto assets and Casps within the South African regulatory remit.
Some of the recommendations include that the Casps be added to the list of accountable institutions falling under Schedule 1 of the Financial Intelligent (FIC) Act 38 0f 2001. This, according to Matshane, will mean that the Casps will be required to adhere to the FIC legislative requirements aimed at anti-money laundering and combating the financing of terrorism (AML/CFT) and other requirements under the act including reporting cash transactions of R25 000 and above.
She said however that the IFWG’s regulatory body will continue to engage domestic industry participants on new and emerging use cases in the crypto asset ecosystem as the industry continues to evolve at a very rapid pace.
