Despite grappling with regulatory and cyber security challenges, local crypto-currency exchange AltCoinTrader continues to see steady growth, says CEORichard de Sousa, in a wide-ranging interview with ITWeb.
Launched in 2015, AltCoinTrader is one of the oldest crypto-currency exchanges in South Africa, and competes with Luno, VALR, Ovex, Cape Crypto and ChainEX, among others.
De Sousa started developing the crypto-currency platform in 2013 and it went live to the public on 25 March 2015. He says AltCoinTrader now offers over 33 different crypto-currencies on the platform, including Bitcoin, Ethereum, Litecoin and Dash.
He points out that regulatory issues and keeping hackers at bay have been some of AltCoinTrader’s biggest concerns.
On the regulatory front, the South African Financial Sector Conduct Authority (FSCA) last year declared crypto assets are a financial product.
It means crypto assets, effective 19 October, are subject to FSCA regulation, under section 1(h) of the Financial Advisory and Intermediary Services Act.
The South African Reserve Bank also announced it is working to introduce a regulatory framework to govern crypto transactions in the country.
Local crypto-currency players have over the years been calling for the regulation of their industry, saying this would help in weeding out bad actors.
Several crypto players have since come together to form industry body Crypto Asset Association of South Africa, and introduced a “code of conduct and ethics” in a bid to flush out bad actors.
Avoiding trouble
Says De Sousa: “Some of the biggest lessons and challenges that we faced along the way is certainly to do with regulation and understanding what you may and may not do in this financial industry.
“We have been working with regulators so that every product and every idea that we want to launch was not going to get the platform in trouble. There are many challenges associated with crypto exchanges – you are accountable for billions of rands of customer funds, you also have a huge responsibility to every single user and you have to make sure the exchange is not hacked.
“It is safe to say that all exchanges suffer with hackers trying to breach the security protocols.”
Regulation and security are the two biggest issues faced, and “making sure the platform is safe, making sure the funds are safe and making sure we are never in a position that we have to shut down”.
In regards to the cyber security threats the industry faces, local crypto firm Africrypt in 2021 made headlines after losing billions of rands in investor funds after allegedly being hacked.
Apart from these challenges, De Sousa says AltCoinTrader has seen “tremendous growth” over the years.
“We attribute this to the ease-of-use of our platform. We continue see steady growth and this has not changed since we opened. I think the reliability and trustworthiness associated with AltCoinTrader is a key factor to this continuous growth we are seeing.”
He adds that competition is now fierce in the local crypto market, with new exchanges being launched to take on the incumbents, and further competition from the traditional banks.
South African banks have largely shunned crypto-currency players, citing lack of regulation and the risks of digital currencies, among other issues.
“The big exchanges seem to be absolutely dominating the market, as they have formed trust with the community, and the new exchanges that are popping up on a monthly basis seem to battle to gain traction and are unable to sustain themselves.
“What we are seeing is a lot of small exchanges opening and closing down, while the big exchanges continue to dominate the space. So, it is a very difficult industry to break into,” says De Sousa.
Becoming a believer
Describing how he decided to start a crypto exchange, De Sousa says after initially thinking Bitcoin was a scam, he started to do some research on the world’s most popular crypto-currency.
“The more research I did, the more I realised Bitcoin and crypto-currencies were the alternative financial system that we desperately needed; not only as South Africans but the world.
“It was a financial system that was fair and just, and wasn’t ruled by anyone. But I think the main reason I started an exchange in South Africa was to bring crypto-currency to the people, because back in 2013, there was no easy way for South Africans to get involved in the crypto economy.
“AltCoinTrader was started to give every South African the opportunity and ability to buy crypto without having to send funds overseas.
“It was not easy to start an exchange, especially in the early days. We started with zero funding and zero financial backing.
“AltCoinTrader is unique because we built that company from the ground up – from grass roots level. It took a little over 16 months of coding before the platform was ready for launch. We started initially with three staff members in a garage from very humble beginnings and we have built the company step-by-step to where it is today.”
The company now has 35 employees.
One of the opportunities the firm sees in the industry is the ability to offer clients yield. “Clients don’t like the investments to just sit stagnant in an exchange or in an account; they like to be able to see their investments grow and that is why AltCoinTrader offers yield on investments.”
Yield farming, or liquidity farming, is the act of lending or staking crypto-currency into a liquidity pool, through decentralised finance, to receive rewards such as interest and more of the staked crypto-currency.
AltCoinTrader currently offers yield on five different crypto-currencies and is expanding, concludes De Sousa.
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