Licensed crypto providers say it’s time to follow global financial market leaders and allow pension funds to invest in crypto assets. From Moneyweb.
It’s time for SA regulators to follow the US example and open pension funds to crypto assets, say crypto asset service providers.
It’s been two years since SA’s National Treasury officially prohibited pension funds from investing in crypto assets, wrote Farzam Ehsani, CEO of VALR, on X.
Since then, the market value of crypto assets has increased by 325%, while bitcoin (BTC) is up 480%.
Local pension funds have been prevented from participating in these gains because of the National Treasury prohibition.
“Let 2025 be the year that Regulation 28 changes to give pension funds the option of including crypto assets. South Africans deserve nothing less,” added Ehsani.
That view is supported by Marius Reitz, general manager for Africa at Luno. “The regulatory landscape is an important factor that will continue to shape the future of crypto in SA. While cryptocurrencies are currently excluded from the asset classes permitted to be held in collective investment schemes, a shift to a more permissive environment, in line with global financial market leaders like the US and UK, could catalyse increased institutional participation and further boost investor protection.”
Regulations
Regulation 28 was amended in January 2023 to allow pension funds to increase their exposure to certain asset classes, such as offshore investments (with a 45% limit), infrastructure (45%), hedge funds (10%), and private equity (15%). Crypto assets were specifically excluded.
“The excessive volatility and unregulated nature of crypto assets require a prudent approach, as recent market volatility in such assets demonstrates,” noted Treasury at the time.
Read: It’s official: Retirement funds can move 45% offshore
The Financial Sector Conduct Authority (FSCA) has since addressed the lack of regulation and now issues crypto asset service provider (Casp) licences. To date, nearly 250 have been issued.
Read: FSCA greets crypto boom with batch of new licences
Given the vast size of SA’s institutional and pension fund assets, allowing crypto to be included in these schemes would likely result in a surge in demand for cryptos from these players, says Reitz.
“Luno’s position as a regulated entity and its custody and liquidity products for institutions give it a strong foundation to support this next phase of crypto’s evolution. The company has built its reputation on operating within a compliant framework and ensuring the security of customers’ crypto assets.”
Even more support for changes
Shiven Moodley, macro strategist at 80Eight, supports Ehsani’s call to amend Regulation 28. There would have to be some investment in setting up the necessary infrastructure for crypto investment, which would impact fund expense ratios, but the potential gains would justify these costs.
“Allocations would be very small because of the draw down the asset class experiences but in the grander scheme of things it might just fall under alternatives in the regulator’s eyes,” adds Moodley.
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Frank Leonette, CEO of the newly launched crypto exchange Afridax, says Regulation 28 needs to evolve to address the rapidly changing financial landscape brought about by innovations like crypto assets and tokenisation of real-world assets on blockchains.
“Many South Africans want to diversify their pension funds and benefit from the incredible performance of Bitcoin and similar crypto assets.”
The US example
US retirement funds are piling into BTC exchange-traded funds (ETFs) launched last year. Even state-run pension funds are eyeballing BTC’s mouth-watering returns and making plans to allocate funds as soon as possible.
Read:
Bitcoin ETFs ‘deemed a success’ by key measures one month after debut [Feb 2024]
Bitcoin rally leaves the world’s original crypto ETFs behind [Dec 2024]
US law does not prohibit crypto investment, though retirement plans must meet minimum standards under the Employee Retirement Income Security Act, which governs fiduciary and due diligence obligations on trustees and administrators.
Surveys show that upwards of a third of retirement fund savers in the US want exposure to crypto assets, with interest more pronounced among younger savers.
