South African Pensions Could Soon Be Invested in Crypto
As the value of cryptocurrencies, particularly Bitcoin, continues to rise internationally, there have been growing calls for South African pension funds to be allowed to invest in cryptocurrencies.
Restrictive Regulation 28 Hampers Investment Options
Currently, Regulation 28 governs where pension funds can invest, and it tightly restricts their investment options.
National Treasury’s prohibition on pension funds from investing in crypto assets has limited their ability to diversify into this emerging market.
Massive Growth in Cryptocurrency Sector
Co-founder and CEO of major South African cryptocurrency exchange VALR, Farzam Ehsani, said that in the two years since the ban was put in place, the crypto sector has seen massive growth.
“Crypto assets have increased 4.25 times ($800bn -> $3.4tn), a 325% increase. Bitcoin specifically appreciated 5.8 times ($16.5k -> $96k), a 480% increase.
Ehsani advocates for lifting the ban on pension funds investing in crypto, urging his fellow South Africans to push for a change in Regulation 28 in 2025.
General Manager for Luno Africa, Marius Reitz, agrees, sharing his support for a more open approach to cryptocurrency investments.
Crypto Has Evolved and Matured Internationally
“I think we need to acknowledge that the cryptocurrency industry has evolved and matured over the last decade. It’s part of the global financial system now, and it’s a much bigger industry than what most people think, or most people want to believe,” Reitz said.
Major corporations such as PayPal and BlackRock are already integrating cryptocurrencies into the global financial system.
South African companies like Discovery are now offering Bitcoin funds, with some international markets even making cryptocurrencies legal tender.
Risks Can Be Managed Within Institutional Frameworks
Reitz suggests that the National Treasury and regulators adopt a more adaptive mindset, allowing for a modest allocation of 1% to 3% to cryptocurrencies.
This would enable pension funds to benefit from the long-term value of cryptocurrencies while minimizing risks that come with direct investment.
Strategies such as dollar-cost averaging and diversification – including Stablecoins – can help reduce the volatility associated with cryptocurrency investments.
Reitz believes that as more investors enter the market and more bonds and sellers participate, the risk associated with cryptography will continue to decrease.
Time for South African Regulators to Catch Up Globally
While the National Treasury currently appears unconvinced, Reitz, and many others believe that it is essential to have an open conversation about incorporating cryptocurrencies into pension funds to stay competitive with international markets.
Bitcoin has demonstrated significant growth in value and adoption since its inception, including increases in the number of users, transactions, and network strength.
Conclusion
South African pension funds should have the option to invest in cryptocurrencies, allowing them to diversify and benefit from the growth of the cryptocurrency sector.
With the crypto industry continuing to evolve and mature, it is high time for South African regulators and the National Treasury to reassess their approach to pension fund investments.
This could bring extensive benefits to the industry, investors, and the broader economy.
This article was first published by Daily Investor and reproduced with permission.
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