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To infinity and beyond: The rise of a crypto empire

To infinity and beyond: The rise of a crypto empire
Luno has been acquired by New York-based Digital Currency Group (DCG) for an undisclosed sum. (Photo: Unsplash / Austin Distel)

The cryptocurrency industry is beginning to see the rise of crypto empires — expanding ecosystems created by early movers and original crypto businesses that aim to dominate the new industry. This is what makes the acquisition of cryptocurrency company Luno by the biggest of them all, the Digital Currency Group, so interesting.

There is nothing modest about cryptocurrency company Luno’s ambitions (hence the name): it is on a mission to upgrade one billion people to a new and better financial system by 2030.

And with five million customers in 40 countries and $14-billion worth of transactions under its belt, one could argue that the company was making modest inroads in this regard.

These ambitions have just been turbo-charged with the news that Luno has been acquired by New York-based Digital Currency Group (DCG) for an undisclosed sum.

A quick explainer – cryptocurrency is a disruptive technology that has been designed to be an alternative to the fiat monetary system. 

Early investors in Luno, such as Naspers, which invested in the start-up in 2015, and RMI Investments, which invested in 2017, have exited their investment.

Luno co-founders Marcus Swanepoel, Timothy Stranex and Pieter Heyns, along with a few other angel investors, will roll their investment into DCG.

“When we started Luno, we did not set out to sell the company,” Swanepoel, who is group CEO, noted in a blog on Wednesday.

“That said, as the industry has evolved over the past few years, it became clearer to me that the most effective way to upgrade the world to a new, better financial system at scale is by having a company and business model that is deeply integrated across the entire industry and value chain, and importantly also one where these parts are able to maintain their own identity and brand.”

There is only one crypto company in the world that has managed to lay the right foundation for this, he says, and that is DCG.

DCG, which has invested in more than 160 crypto and blockchain firms and humbly describes itself as the epicentre of the blockchain and Bitcoin industry, is very much aligned to Luno in terms of its goals.

“Our mission is to accelerate the development of a better financial system. We build and support Bitcoin and blockchain companies by leveraging our insights, network, and access to capital,” reads the mission statement.

It owns Grayscale Investments, the world’s largest digital asset management company with assets under management of $3.8-billion, up 80% from $2.1-billion in May 2019.

It owns Genesis, which provides all the services that global investors such as institutional funds and market makers need to build their digital asset portfolios. And it owns CoinDesk, the industry’s leading independent source of blockchain news, research, and data. 

It has also been part of the Luno story since the early days, investing in its seed round in 2014, as well as its Series A and B rounds, which enabled its expansion. 

“I’ve had the pleasure of working closely with DCG’s founder, Barry Silbert, for nearly seven years now,” says Swanepoel. “I can still vividly recall conversations with Barry about the future of crypto when we were just five early Lunauts sitting in a small room and now we’re nearly 400 across seven offices.” 

History will be the judge of whether 2020 was the tipping point for the acceptance of crypto assets (blockchain, the technology that underpins and secures cryptocurrencies, is already widely used and accepted). 

That said, this year, despite or perhaps because of Covid-19, has seen an explosive interest in safe assets, which brought crypto to the attention of many new investors.

“We have seen exceptional growth in the last few months,” says Marius Reitz, GM of Luno Africa. “Much of this is from new investors who are looking at cryptocurrency as an inflation hedge, not just in Africa but across the world.”

Africa, as it turns out, has a huge appetite for cryptocurrencies. Luno has offices in Nigeria, Uganda and Zambia, all countries where the central bank has proven open to crypto exchanges and is willing to support the development of the necessary enabling framework. 

“Growth is fuelled in these countries by dollar shortages, failing currencies and fears of inflation,” Reitz says. 

That said, Luno has recently expanded into Australia, a country with a stable inflation rate and currency. “It’s part of our strategy to take cryptocurrencies to more and more people in the world.”  

Australia offered an opportunity because existing offerings were highly complex, making it very difficult for retail investors to buy or sell crypto assets.

“We teach our customers what cryptocurrency is, and provide them with the easiest and safest way to trade. That is our unique selling point,” Reitz says. 

Now, with the acquisition by DSG, Luno is expected to go even further, and become larger than ever. DM/BM

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