A] Prelude
For more information on pension systems, risk and coverage, feel free to visit our dedicated webpages:
https://expatpensionholland.nl/south-africa-expat-pensions
https://expatpensionholland.nl/global-pillars-systems
https://expatpensionholland.nl/global-investments-risks-0
https://expatpensionholland.nl/global-social-security-coverage
B] The Issue
As the value of cryptocurrencies, particularly Bitcoin, continues to rise internationally, there have been growing calls for South African pension funds to be allowed to invest in cryptocurrencies. Currently, Regulation 28, which governs where pension funds can invest, tightly restricts their investment options.
C] Call for change
Proposals suggest amending this regulation to include cryptocurrencies, which could have significant implications for the industry and investors. Farzam Ehsani, co-founder and CEO of major South African cryptocurrency exchange VALR, said South Africans deserve nothing less than to lift the ban on pensions investing in crypto.
He said in the two years since National Treasury officially prohibited pension funds from investing in crypto assets, the sector has seen massive growth. “Crypto assets have increased 4.25x ($800bn -> $3.4tn), a 325% increase. Bitcoin specifically appreciated 5.8x ($16.5k -> $96k), a 480% increase,” said Ehsani. “Let 2025 be the year that Regulation 28 changes to give pension funds the option of including crypto assets.”
General Manager for Luno Africa Marius Reitz agreed, sharing his support for this idea. “I think we need to acknowledge that the cryptocurrency industry has evolved and matured over the last decade,” Reitz said. “It’s part of the global financial system now, and it’s a much bigger industry than what most people think, or most people want to believe. If you just look at the facts, it’s integrated by major global financial corporations.” These include companies such as PayPal and BlackRock.
D] Local situation
In South Africa, Discovery offers a Bitcoin fund, Pick n Pay accepts Bitcoin payments, and some international markets have even made cryptocurrencies legal tender. Listed companies also now provide cryptocurrency services, and there is a global shift in attitudes toward crypto.
“It’s an industry that has matured tremendously, and I think we’re also seeing a massively clear shift in global attitudes to crypto, specifically in the US, which is in a different adoption curve to South Africa,” Reitz said. The United States, for example, is considering a strategic Bitcoin reserve, and US asset managers offer Bitcoin investments to institutional investors. Through firms like Fidelity Investments, American investors can even include Bitcoin in their retirement plans.
In South Africa, allowing pension funds to invest in cryptocurrencies could benefit the industry, according to Reitz. “It will also be good for investor protection because currently, due to the lack of an investment option for pension funds, people are forced to vest in cryptocurrency directly.”
This direct investment can be (very) risky, and opening pension funds to cryptocurrency investments would provide safer, regulated access to these assets for South African investors. The National Treasury currently appears unconvinced about allowing pension funds to invest in cryptocurrencies, with concerns centred on protecting people’s pensions.
Despite Bitcoin’s recent rally after the Trump election, when its price reached all-time highs, many people expect the asset to drop off in the near future. “We should just be open to the idea,” Reitz said. “From a regulatory perspective, from a Treasury perspective, we should follow an adaptive mindset, and we should acknowledge the fact that in all asset classes, there is some element of risk.”
He suggested that the Treasury and regulators adopt a balanced perspective, especially considering that pension funds are already permitted to allocate a small percentage of their assets to alternative investments. A modest allocation of 1% to 3% to cryptocurrencies could offer a “sensible opportunity”, minimising downside risks while leveraging the long-term value demonstrated by Bitcoin and other cryptocurrencies.
While Bitcoin may be a volatile asset class, it might be possible to manage that risk effectively, particularly within pension funds’ long-term investment horizons. “There are also other strategies that asset managers can follow to reduce the volatility,” Reitz said. This includes dollar-cost averaging, where investments are made incrementally over time rather than as a lump sum, which can help mitigate short-term volatility.
“You can also include other cryptocurrencies, for example, Stablecoins, as part of your crypto investment strategy to reduce the volatility,” he said. “If you look at the data, volatility has gone down in the market — although if you look at it on a short-term, week-on-week, month-to-month basis, it won’t seem that way.”
E] Finally
As the number of investors increases and more bonds and sellers enter the market, the risk might continue to go down — an effect which would be further compounded if pension funds around the world start investing in crypto. Bitcoin has demonstrated significant growth in both value and adoption over the past decade. This includes increases in the number of users, transactions, and overall network strength.
“We are required to implement changes,” Reitz said. “Those changes won’t happen overnight, but I think at this point, we should at least be open to the idea of allowing crypto investments as part of the underlying assets that pension funds can invest in. And we should be willing to have that conversation.”