Hard at work: Former First National Bank CEO Michael Jordaan is the principal backer of VALR. The platform has also attracted funding from US-based Bittrex, one of the largest exchanges in the world. Picture: RUVAN BOSHOFF/FINANCIAL MAIL
Hard at work: Former First National Bank CEO Michael Jordaan is the principal backer of VALR. The platform has also attracted funding from US-based Bittrex, one of the largest exchanges in the world. Picture: RUVAN BOSHOFF/FINANCIAL MAIL

A new cryptocurrency exchange, backed by former First National Bank (FNB) CEO Michael Jordaan, and based in rand, is hoping to challenge SA’s largest incumbent, Luno.

Formed by a breakaway team from Rand Merchant Bank, VALR  raised R20m in July 2018, with Jordaan its principal SA backer, along with its four founders.

The cryptocurrency platform has also attracted funding from US-based Bittrex, one of the largest cryptocurrency exchanges in the world.

Bittrex “had a similar partnership in South America and Europe and when I approached them they were very keen because SA was one of the emerging markets they were keen to expand into”, said Badi Sudhakaran, VALR’s chief product officer.

To date, Luno has dominated SA’s cryptocurrency market and is linked to the RMB stable of companies through AlphaCode, Rand Merchant Investment Holdings’ fintech development hub.

Cryptocurrencies are regarded as a form of electronic cash without a central bank and are traded directly between buyers and sellers without intermediaries.

VALR is hoping to woo cryptocurrency traders with cheaper fees than Luno, as well as the ability to trade in more than 50 other cryptocurrencies besides Bitcoin and Ether.

Where Luno charges 1% of a trade to the “taker” and 0% for the “maker”, VALR plans to charge 0.2% for the “taker” and pay 0.1% to the “maker”, to stimulate liquidity.

According to StackExchange, Bitcoin exchanges levy different fees to differentiate “whether you’re increasing the size of the order book or decreasing the size of the order book”.

If a trader creates an order that is matched with existing orders, they are considered takers as they remove liquidity from the market. Traders that place an order that is not matched by existing bids and offers add liquidity to the market and are regarded as “makers”.

Bitcoin has burned many would-be traders who have sought to take advantage of its extreme volatility. According to VALR, at their peak in January 2018, all cryptocurrencies were worth $830bn. That plunged to $102bn in December 2018 but has since climbed to $250bn.  

“There is no way to value [cryptocurrencies] apart from the temperamental forces of supply and demand, so it is important to keep this in mind for anyone thinking about putting money into Bitcoin or other cryptocurrencies,” said VALR CEO Farzam Ehsani.   

Bitcoin peaked at close to $20,000 in December 2017. A year later, it had fallen to $3,200. Bitcoin has since rallied to around $8,000 and one Bitcoin was worth R114,366 on Tuesday.

Cryptocurrency prices have also been damaged by persistent security breaches. In the latest incident, hackers stole more than $40m worth of bitcoin from Taiwanese crypto exchange Binance.  But Sudhakaran said that VALR was “very confident” in managing its customers’ security.

“We have had three independent security experts come in and do penetration testing and audits. We hold ourselves to top-notch standards in terms of value and security,” he said.

VALR plans to go live on June 11.

giulietta@bdtv.co.za