Valr CEO Farzam Ehsani claims that the limited decentralized supply of Bitcoin will make it an attractive hedge against inflation and currency risk.
Hedge against Bitcoin Currency Depreciation
As South African company Altvest Capital makes headlines by employing Bitcoin as its first public company as its strategic reserve asset, industry experts highlight the growing appeal of cryptocurrencies in emerging markets facing sustained currency depreciation.
Farzam Ehsani, CEO and founder of Valr, one of South Africa’s leading cryptocurrency exchanges, claims that the driver behind Altvest’s decision is universal, but perhaps more urgent for an institution in an economy like South Africa.
“The factors behind this decision are not different to those considered by all institutions around the world. Perhaps given the higher depreciation rate of currency compared to the more widely adopted Fiat currency, it is likely that emerging market institutions should consider Bitcoin (BTC) as a strategic reserve asset.”
Many African currencies have depreciated in recent years, including the South African rands having experienced volatility over major currencies like the US dollar over the past three years. There is growing fear that this trend is likely to continue in an era characterized by trade wars and protectionist policies. According to a report from the World Bank, several African countries suffer from high inflation and currency instability due to factors such as fluctuations in commodity prices, political uncertainty and global economic pressures.
For example, a 2023 report from the International Monetary Fund (IMF) highlighted sustained inflationary pressures in several African economies, leading to a decline in the purchasing power of local currencies. Nigerian Naira has exacerbated its economic challenges and has seen significant depreciation. Furthermore, the Egyptian pound has been subject to several devaluations in response to economic reforms and external pressures.
These trends have led businesses to seek valuable alternatives, and BTC, with decentralized and limited supply, is seen as a hedge against inflation and currency risk.
However, Ehsani acknowledges that adoption as a reserve asset for BTC is not without challenges. “The main challenge is psychological,” he explained. “It is more difficult to change the minds of the committee than to change the minds of individuals, and therefore institutions have been in the cryptocurrency realm since retail.”
Bitcoin’s inherent volatility and regulatory uncertainty surrounding cryptocurrencies also pose obstacles to institutional adoption. Companies need to navigate complex accounting and risk management frameworks while addressing concerns from stakeholders.
Despite these challenges, Ehsani believes that Altvest’s movements are showing growth trends. As more South African and African companies tackle currency depreciation, Bitcoin’s appeal as a strategic financial asset is likely to intensify, potentially reshaping the continent’s financial situation.
South Africa’s Road to Leave FATF Grey-List
Meanwhile, Ehsani provided this idea as to why companies keen to hold cryptocurrency in reserves should consider BTC only.
“If an institution has assets that can afford to hold for a long period of time, Bitcoin is a natural asset to consider given its amazing valuation over the past 15 years and its promise to appreciate the future even more,” the founder of Valr said.
South Africa is widely recognized as one of Africa’s top crypto markets, but in early 2023, the Financial Action Task Force (FATF) over money laundering concerns involving crypto assets revived the industry. Esani, the first chair of South Africa’s Financial Blockchain Consortium, characterized Greylist as a “scar” in the country that stakeholders are eager to remove. To do this, South Africa, one of several African countries on the FATF greylist, had to pass anti-money laundering laws and regulate the crypto industry.
For example, starting in late 2023, the South African Financial Sector Authority (FSCA) began issuing licenses to crypto asset service providers, and by December 2024 approximately 248 such licenses had been issued. Valr was one of the first exchanges to receive these licenses. Before licensing for CASPS, South Africa had declared Cryptocurrency as a financial instrument to comply with FATF recommendations.
According to Ehsani, the South African Financial Information Unit (FIU) also plays a role in its willingness to remove the country from its grey list.
“The Financial Intelligence Center (FIC) is also supporting its role, using its data to work on money laundering and working on important FATF action items. Legal updates will help South Africa resolve 20 of 22 items by February 2025. In the case of VALR, FSCA’s CASP framework was a standout change in embedding cryptography into a regulated, formalized system,” the CEO explained.
Taking these and other measures appears to have had positive consequences as the FATF praised African countries at the end of its plenary conference in France. Some South African media reports suggest that the country is likely to be removed from the greylist later this year. If this happens, Ehsani believes it will help the country regain its previous position in the global financial system and regain its perception as “one of the world’s top banking systems and jurisdiction and a strong emerging crypto ecosystem.”
