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CAPE TOWN – The United States (US) owner of (SA) South African-founded cryptocurrency exchange Luno reported a loss of US$1.1 billion (R20 billion, at current exchange rates) last year, according to US media reports.

Cryptocurrency news website CoinDesk reported that the Digital Currency Group (DCG) was hit by falling cryptocurrency prices and the bankruptcy protection filing of its Genesis lending arm.

CoinDesk, like Luno, is a subsidiary of DCG, which also owns more than 200 crypto-related companies, including Genesis, which is one of the largest lenders of cryptocurrencies in the world. Earlier this year, Genesis filed for bankruptcy in New York.

Liquidity

The company faced a liquidity crunch at the end of last year, and abruptly stopped all withdrawals and new loans.

This came after a meltdown in the crypto market in 2022, with some of the biggest cryptocurrencies losing 50 per cent to 60 per cent of their value. In addition, Genesis was hit

by the spectacular collapse of FTX.

Genesis held US$175 million (around R3 billion) with the bankrupt crypto exchange, which it now can’t access.

Last month, Genesis was also sued by the US financial authorities for allegedly selling unregistered investments.

Luno recently announced that it will retrench 35 per cent of its labour force, including employees in South Africa. Once the retrenchment is complete, the exchange will have around 700 staff members.

While Luno’s head office is in London, it was founded in South Africa in 2013 and remains the country’s

biggest cryptocurrency platform. In the past 10 years it has grown to 10 million customers in 40 countries.

Luno SA country manager Christo de Wit said that last year’s downturn in the tech sector, the crash in the price of cryptocurrencies, and the bankruptcy of FTX Trading meant Luno had to institute job cuts.

Strain

“While we anticipated a downturn and proactively planned ahead with a business and funding model …. The sheer scale and speed of all of this happening, and all at the same time, put significant strain on our original plan,” he said last month.

“Decreasing employee headcount

in all of our markets was needed to be set up for success going forward.”

De Wit said that problems at DCG had not impacted the ability of Luno clients to withdraw funds.

“Luno holds customers’ funds safely and securely independently of DCG and those funds remain accessible to customers at any time,” he said last month.

Luno is run independently from its parent company, said De Wit, and customer funds are segregated from corporate funds.

“Luno’s published proof of reserves verification confirms that we hold all customer cryptocurrency on a 1:1 basis.”