Intensifying crypto regulation may increase the cost of compliance for crypto asset service providers (CASPs), but it is highly unlikely to negate the cost advantage of cryptocurrency-based financial products.
That’s the word from Luno’s country manager for South Africa, Christo de Wit, and VALR co-founder and CEO Farzam Ehsani.
“Blockchains and crypto assets represent a paradigm shift in how finance works,” Ehsani told MyBroadband.
“Crypto services such as payments are a fraction of the cost of their traditional finance counterparts and will be increasingly adopted by the world as time goes on.”
Even with increased costs due to increased regulatory requirements, Ehsani said crypto asset services offer a step change in the efficiency of financial services.
He said they provide orders of magnitude improvements in speed and cost, particularly for services such as global payments.
De Wit concurred, saying that crypto products are structurally designed to be more efficient than traditional finance.
“The other beautiful aspect about crypto assets is that they offer individuals and institutions alike the option of taking custody of their own digital assets,” Ehsani stated.
“To be clear, this is not possible in traditional finance, where every asset, from digital cash to stocks and bonds, must by definition be held by a trusted intermediary.”
Ehsani explained that with crypto assets, everyone has the option to self-custody, eliminating the need to trust intermediaries.
“This option is particularly important at a time when many feel that trustworthiness in society is becoming scarcer,” he said.
“Of course, institutions like VALR — which is itself a trusted intermediary — will keep providing services to those who wish to be served.”
However, he said the point was that the option to self-custody exists in the crypto world, while it does not in traditional digital finance.
MyBroadband asked whether regulations evolving to protect consumers and comply with global anti-money laundering (AML) and counter-terrorism financing (CTF) standards would eliminate self-custody as an option.
“We are already seeing an increase in friction being applied, for example, with the implementation of the Travel Rule,” De Wit said.
The Travel Rule requires financial institutions, including those involved in virtual asset transactions, to provide relevant originator and beneficiary information alongside transactions.
It is a requirement of the Financial Action Task Force, which greylisted South Africa on 24 February 2023 for falling short on its eleven measures for combating money laundering and the financing of terrorism.
As part of efforts to get South Africa off the greylist, the Financial Intelligence Centre (FIC) issued Directive 9 last year.
This notified crypto asset service providers that they would be required to comply with South Africa’s version of the Travel Rule from 30 April 2025.
However, while regulations like the Travel Rule increase compliance costs, De Wit said it does not gate products behind intermediaries.
“It does add necessary friction to adhere to global AML/CTF processes and protect consumers,” he said.
One area where cryptocurrencies completely outperform traditional finance is cross-border transfers. International transactions are much cheaper and faster over a blockchain than through SWIFT.
MyBroadband asked whether additional regulatory overhead would eventually cause legal cryptocurrency transactions to cost as much as regular international wire transfers.
“The traditional cross-border flow via SWIFT uses multiple intermediaries and doesn’t utilise blockchain,” De Wit said.
“Blockchain technology can be easily incorporated to ensure proper reporting, making it structurally more efficient than the legacy SWIFT system.”
Ehsani argued that eventually there would be no distinction between traditional and crypto finance, with the benefits of blockchain technology eventually being integrated into financial institutions.
“VALR has entered agreements with several large financial institutions to provide the crypto infrastructure needed to power a crypto asset offering,” he stated.
“We recently announced our partnership with Mukuru, one of the largest money transfer businesses in Africa, with over 17 million customers.”
They have also signed agreements with two of the largest banks in South Africa, with more to come, as well as several of the largest non-bank financial institutions.
“In short, there won’t be any financial institution without a crypto offering in the next few years, and VALR has positioned itself to provide the crypto infrastructure needed to launch such offerings,” said Ehsani.
Luno recently announced a first-in-Africa partnership with Discovery Bank that will integrate the exchange’s cryptocurrency services directly into the bank’s mobile app.
“There was a time when financial institutions were hesitant to move online, as it wasn’t clear if the Internet was a passing fad or not,” Ehsani said.
“I see the same pattern happening with crypto assets. It’s just a matter of time before traditional finance and crypto finance merge to become the future of finance.”
