By Jurgen Kuhnel, CEO and Co-Founder at Xago
With trading opportunities suddenly few and far between in the New Year, it’s a good time to reflect on the important issue of regulation of the cryptocurrency industry.
To put it in a nutshell: We’re waiting with bated breath to see how the South African Reserve Bank (SARB) seeks to regulate the industry.
At the heart of the matter is the thorny issue of exchange controls. One of the concerns often raised about cryptocurrencies is that it allows people to freely move money out of the country with SARB being none the wiser.
As things stand, we only have a single discretionary allowance (SDA) of R1-million per calendar year, so there are strict limits imposed on what we may spend overseas without asking SARB’s permission.
This at a time when many South Africans may be tempted to move money out of the system due to political uncertainty. If SARB were to take a cynical view, they could come up with something draconian or a blanket ban.
However, that would also be self-defeating because of the paradox that exchange controls present a barrier to the inflow of money from trading activities.
For example, if you trade with R15000 and bring R15500 back less than an hour later, you’ve done the country a good turn because the profit is there to spend and stimulate economic activity. In addition, the Receiver of Revenue will benefit from the income tax you are liable for.
Unfortunately, you’ll be using up your SDA in no time if you’re an active trader buying crypto with your credit card on overseas exchanges. And South Africa will lose with you.
Consequently, I trade prudently and won’t take the first and best opportunity of making a quick buck when a gap opens between Binance and Xago. It must be big enough to return a decent profit because I don’t want to use up my SDA by grabbing R100 on a trade of $1000.
But, of course, cryptocurrency is not just a vehicle for trading. In fact, it can potentially have a very positive social impact. For example, the cryptocurrency (XRP) allows for a quick transfer of money across borders. XRP can be swiftly transferred from one wallet to another, and then be withdrawn at little cost by the recipient. Therein lies a potentially huge value, especially in terms of meeting the needs of many Africans.
As things stand that can’t be done without red tape as it requires permission from SARB. The entire purpose is therefore defeated.
The crux is fundamentally the disruptive nature of cryptocurrency. By doing such transferrals, you’re effectively taking business away from banks, who are predictably very nervous about the impact on their bottom lines. First prize for banks is probably that SARB takes a stance that cryptocurrency transactions should be banned in South Africa.
The only problem with that is that the horse has bolted. Just like traditional pay-TV networks will find it difficult if not impossible to get streaming services like Netflix regulated, and cellular phone network providers angry about the loss of SMS-revenue cannot sabotage WhatsApp, the world as a global village has moved on.
Innovation is what drives humankind. Airbnb is a natural evolution of the hotel/guest house industry just as Über has revolutionized the taxi industry. We’re perfectly entitled not to be ripped off when it comes to accommodation and transport, just as banks should not be afforded total control over us.
We can’t realistically expect SARB to be laissez-faire on the issue of regulation, but let’s hope they keep an open mind.
Regulation of the cryptocurrency industry will be a good thing. Even closer scrutiny of our activities won’t necessarily be bad, provided there is flexibility in terms of how we trade and the likes of XRP can be used for the constructive purpose for which it was created.
Cryptocurrency should be considered an opportunity rather than a threat, so here’s hoping the next move is progressive rather than restrictive.
By Sonya Kuhnel, COO and Co-Founder at Xago
There are few things like a dip in cryptocurrency prices that excites the mainstream media and they’ve had a field day since the bubble burst in 2018.
Those of us with a longer-term view considered that a necessary event and we’re entering a welcome phase where the wheat is sorted from the chaff, with Xago considering XRP very much in the former category.
Price predictions certainly make for interesting reading.
Investinghaven.com made an insightful observation by stating that XRP can go lower until weak crypto investors have sold, after which smart crypto investors take control.
As I write here, you can purchase a single XRP for R3,28 on Xago. Just last week it was briefly priced at R2,81.
Some crypto experts generally take a positive long-term view of the XRP price.
The truth, however, is that you don’t need an uptick of the price to use XRP to put cash in your pocket. In fact, lower prices offer an exceptional trading opportunity, especially for South Africans.
For example, the price difference between overseas and local exchanges is sometimes around 10%. On a good day you can buy on Binance and sell at a premium on Xago, making a tidy profit even after all the charges of the payment platform were deducted.
The process is staggeringly easy once you become comfortable at navigating your way around the Binance site.
Once you indicate that you would like to buy a certain amount of XRP, you will be offered payment platform options, with Koinal in our experience being the cheapest facilitator.
I did a transaction recently and the sequence of events, after submitting my payment through Koinal, were as follows:
- An e-mail from Koinal informing me that my payment was being verified.
- Another e-mail four minutes later that my payment had been approved and confirming the amount of XRP I would receive.
- An e-mail six minutes later that XRP had been sent to my Binance wallet address.
- Binance, a minute later, e-mailed a confirmation that I had received a deposit.
- I then made a withdrawal on my Binance wallet, requesting that the XRP be sent to my Xago wallet. Binance sent an e-mail requesting confirmation, which I provided with a single mouse click. Binance followed up with an e-mail confirming a successful withdrawal.
- Minutes later I could sell my XRP for rands on Xago and pocket a tidy little profit after cashing it into my bank account for a charge of only R8,50.
From beginning to end, the process took 25 minutes.
A word of caution: this was a seamless transaction and, of course, there is a chance that everything won’t always go according to plan — as is the case with any investment. I also first did a calculation on a spreadsheet to determine exactly what my profit will be before starting the transaction (including fees).
There may also be price swings during the process, but seasoned traders overcome that by keeping and selling assets on one platform as soon as they buy on the other, thereby locking in the price and reducing the risk to the technical aspects of the process.
Opportunities to make these winning trades come and go, but you will always be in a position to see the price you’ll get through the transaction on Binance and weigh it against what is on offer on Xago.
So as far as the future price of XRP is concerned, I’ll ask my husband his opinion when I take him out for dinner with the money I made between Binance and Xago.
- Disclaimer: The above does not constitute advice and trading is by its nature a risky endeavour, so don’t do it with money you can’t afford to lose. Also keep in mind that the above-mentioned trade impacted on the writer’s annual single discretionary allowance, which is capped at R1million per calendar year. Stay on the right side of the law!
- If you would like to learn more about these opportunities, enrol for the Blockchain Academy and Xago’s new course: Trade and Arbitrage Effectively with XRP on 4 February 2020 via Google Hangouts.
More info here: https://bit.ly/35EVw7M
8th October 2019: Today Xago, a Cape Town-based fintech company, announced the launch of its Ripple gateway and custom built exchange in South Africa. The exchange connects to and utilises RippleNet to trade, send and receive XRP only, the native digital asset used by Ripple.
Xago has built the exchange in order to create liquidity of XRP in South Africa, acting as the market-making platform for cryptocurrency enthusiasts and businesses that wish to trade with and utilise XRP and the Ripple Ledger. Due to the fast settlement between wallets, RippleNet is a viable option for transferring value between exchanges, reducing exposure to volatility.
Xago was founded by Jurgen Kuhnel (CEO), Sonya Kuhnel (COO) and Mark Chirnside (Chairman) in 2016 and incubated out of CiTi’s Bandwidth Barn in Woodstock thanks to Ian Merrington and his team. The company believes that blockchain technology, and in particular RippleNet, will play a critical role in transforming the payments industry.
‘By solving the double-spending problem the Bitcoin blockchain opened up digital peer-to-peer payments without the need for a trusted 3rd party through the process of mining. Ripple took this one step further and built a faster and more cost-effective decentralised ledger to compete in the high throughput and fast clearing retail and banking environments,’ says CEO Jurgen Kuhnel referring to their choice to specifically focus on Ripple and XRP.
Once the exchange has sufficient liquidity, Xago will launch its payment switch which connects to the retailers through their existing hardware and software systems. Where Xago is utilised, it will replace the need for acquirers and card networks for retailers, and with the use of RippleNet and XRP enable cross-border payments in the future. Consumers will be able to pay for goods and transact at the point of sale using only their mobile and mobile number, bypassing traditional payment rails.
Xago’s mobile number based identity system is built to connect mobile devices, the blockchain and retailers in one seamless experience. Together with significantly lower transaction fees, the Xago platform is gearing to compete in the high stakes retail environment. This will enable clients to create new and innovative products that will ultimately benefit the end consumer.
Xago’s Chairman Mark Chirnside added, ‘This is no small step on the journey of Xago.io. With this launch and with the welcomed constructive approach we take with regulatory compliance and best practice, this platform holds the promise to reduce cost and friction, at a very interesting time in the payments arena. Personally I am honoured to be involved as an investor and as Chairman’.
In late 2018, the start-up received investment from African Technology Investments Ltd. It has spent the 1st half of 2019 setting up operations and engaging with the regulators and the broader ecosystem to build a best-in-class product that will not only add value to its clients but also comply with regulations going forward The start-up has a broader vision for payments across Africa and has plans to expand operations into other markets in the future. Kuhnel says, ‘In Africa, we have an opportunity to rethink the way money flows, what it costs and the time it takes to reach a destination. Mobile has shown us how important innovation is on our continent. We must build on this and continue to provide solutions that will benefit consumers in low to middle income countries who need it most, reducing the cost and friction of moving money is absolutely key.’