View profile

Preventing South Africa’s next bitcoin Ponzi scheme

Preventing South Africa’s next bitcoin Ponzi scheme
By get.Africa Weekly • Issue #54 • View online
Goeie môre,
That’s “good morning” in Afrikaans
On Friday 29 January, Tesla chief Elon Musk changed his Twitter bio to “#bitcoin”. And almost immediately, the world’s most popular cryptocurrency jumped by as much as 14%.
This latest bull run coincided with events in Musk’s native South Africa that, in contrast, are likely to make local investors and crypto enthusiasts significantly more bearish.
The previous day (28 January) was the deadline set by the authorities to receive comments on a draft proposal that would increase their oversight of not only bitcoin but of all cryptocurrencies.
Tightened grip
One of the biggest misconceptions about businesses in the crypto space is that they are unregulated. 
But in a recent interview, Marius Reitz, head of Luno, the largest bitcoin exchange in South Africa, tries to correct this impression. According to Reitz, Luno is currently registered with the Financial Intelligence Centre (FIC). 
However, it’s the Financial Sector Conduct Authority (FCSA) that wants more control. Their proposal includes:
  • Increasing the barrier to entry: All crypto service providers, including exchanges, advisors, and brokers must be authorised as financial services providers.
  • Recognition: Cryptocurrencies will be recognized as a financial product.
Although, what kind of financial product — whether a currency, security, a commodity, or something new — will become clearer in the coming months.
Narrow scope
One thing that is clear right now, however, is that the FCSA wants to clamp down on crypto scams, like the one involving Mirror Trading International (MTI).
MTI was a multi-level marketing (MLM) investment scheme that used bitcoin as its base currency. The company traded on its member’s behalf and distributed profits on a fixed basis.
By November 2020, they had amassed over 280,000 members and were controlling up to 17,000 BTC (approximately $403.8 million).
Then in December, something happened. The company’s CEO went AWOL, along with the funds of MTI’s members.
He hasn’t been seen anywhere since. (Full story)
Unsurprisingly, the calls for bitcoin regulation have grown louder since that incident. 
But there’s a note of caution: The proposal in its current form is more likely to make it harder for the next Luno to grow than it is to stop the next MTI scam from taking place.
That’s because a significant number of crypto companies operate in regulatory grey areas not by chance but by design. Case in point, as big as MTI got, they were never fully registered under the existing regulatory framework. 
The onus, therefore, remains on the consumer to separate the Lunos of this world from the MTIs. 
As a rule of thumb, any provider that’s either building multi-level marketing (MLM) systems backed by crypto or is offering fixed returns on crypto investments is suspect. 
Bitcoin is a speculative investment, whose value can change with something as unpredictable as a billionaire changing their Twitter bio.
It’s, therefore, improbable that anyone can build a successful MLM business or consistently offer fixed returns on an asset that’s that unstable.

get.Africa is a weekly roundup of the most interesting stories in African tech. To support, follow us on Twitter, subscribe to our YouTube channel, share this issue or send us an email. You can also check our archives.
Credit: Chris J. Davis (@chrisjdavis)
Credit: Chris J. Davis (@chrisjdavis)
What's the Big Deal?
+ KSh: Pula, a Kenyan insurtech startup that provides agricultural insurance to smallholder farmers, has closed a $6 million Series A funding round. The Series A round was led by TLcom Capital, with participation from Women’s World Banking.
+ ₦: Cowryrise, a Nigerian wealth management startup, has raised $3 million in pre-Series A funding led by Quona Capital. There was also participation from Sahil Lavingia, Tsadik Foundation, and a syndicate of local and diaspora based Nigerian angels.
Diary of a crypto trader: The rise, fall, and rise again
How South Africa’s new Covid-19 vaccine ‘ID system’ will work
Why Carbon’s zero-interest ‘buy now pay later’ loan is exciting and worrying at the same time
Online gaming communities are a growing trend in Nigeria
Cross-border money transfer in Africa: is bitcoin the silver bullet?
Charts + Graphs
Africa's growing data center and last-mile capacity (Source: Financial Times)
Africa's growing data center and last-mile capacity (Source: Financial Times)
This article details the race to upgrade the continent’s digital infrastructure by technology companies like Facebook and Google. But beyond submarine cables, there are signs of growth in the capacity of the data centers and last-mile connections.
+ Reads
+ Iyin Aboyeji’s Future Africa returned $3.7m to investors, now he wants to fund women in tech. And he isn’t the only one, Endeavor Nigeria MD, Eloho Omame and PiggyVest Co-founder/COO, Odunayo Eweniyi are teaming up to support female entrepreneurs.
+ In Nigeria, NIMC authorises telcos to carry out NIN registration barely two weeks to deadline.
+ After the recent launch of Spot Money, this article compares all the South African banks that offer bank accounts with no monthly fees.
+ Elon Musk and Jeff Bezos clash over satellite internet fleets.
+ Vodafone considers selling Ghana business to Vodacom.
Watch + Listen
How a South African Tech Journalist Cofounded QAnon
How a South African Tech Journalist Cofounded QAnon
uLesson - How the edtech platform is bridging the educational gap across Nigeria & Anglophone Africa
Building a savings culture with PiggyVest's Odunayo Eweniyi
Overheard on Twitter
Peoples Gazette
We are in touch with MTN, Glo and Airtel executives to resolve the disruption, which we regard as a targeted sabotage of the work we have been doing to throw light in the darkest corners of Nigeria’s socio-political space.
+ I am writing a book. It’s a post-pandemic guide to remote work for African business. If you want to get updates, subscribe to the newsletter.
+ To make whiteboard animation videos like this for educational or marketing purposes, please send us an email.
Did you enjoy this issue?
get.Africa Weekly

African tech in a language you'll understand. The most important stories contextualized and delivered to your inbox every Monday. Curated by Chiagoziem O.

If you don't want these updates anymore, please unsubscribe here.
If you were forwarded this newsletter and you like it, you can subscribe here.
Powered by Revue
get.Africa Media, Nigeria