Crypto exchange Luno says it will shave its global headcount by 35% in response to the crypto winter that has hit the company’s revenue numbers.
Though started in SA, the company has since moved its headquarters to London, with a network of offices in SA, Asia and Europe. The company was purchased in 2020 for an undisclosed sum by Digital Currency Group (DCG).
Read: SA crypto pioneer Luno finds a US buyer [Sep 2020]
Luno employs 950 staff globally, meaning 330 employees face the axe. It is not yet known how many SA jobs are on the line. CoinDesk estimates that nearly 30 000 jobs have been lost worldwide due to a brutal crypto winter that has devastated company revenues and trading volumes.
“2022 has been an incredibly tough year for the broader tech industry and in particular the crypto market. Luno unfortunately hasn’t been immune to this turbulence, which has affected our overall growth and revenue numbers,” wrote CEO and co-founder Marcus Swanepoel in an internal memo to staff on Wednesday.
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“As a result, we have to readjust our focus to maintaining our leadership position in our core markets, and continue to lay a strong yet sustainable foundation for the business as we prepare to come out of this current cycle in a very strong position.”
The past few months have been particularly difficult, as the crypto industry faced a number of “unforeseen and very extreme events”, added Swanepoel, including a global economic downturn, an even bigger downturn in the tech sector, and a series of shocks to hit the crypto sector, including the failure of Luna, Three Arrows Capital and FTX.
“This in turn has impacted us indirectly in a number of ways: on the capital side, a significantly more constrained funding environment, with the market’s focus shifting from long-term investment to shorter term profitability, and on the operating side, a negative impact on market sentiment and consequently on growth and revenue for our business, along with all of our peers and competitors,” he noted.
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“While we anticipated a downturn and proactively planned ahead with a business and funding model that can be resilient to some of these factors, the sheer scale and speed of all of this happening, and all at the same time, has put significant strain on our original plan,” added Swanepoel.
Luno’s response to the market downturn is to focus on its core strengths and substantially reduce its cost base, which includes the reducing the headcount.
Swanepoel said customer funds are safe and operations will continue as normal, albeit with fewer staff.
DCG, the group that owns Luno, is in financial difficulty with one of its subsidiary companies, crypto lender Genesis, filing for bankruptcy in the US earlier this month.
Genesis was reportedly owed $1.2 billion by another crypto company, Three Arrows Capital, which in turn hit the wall when Luna and TerraUSD collapsed earlier in 2022.
Read: Crypto lender Genesis files for bankruptcy as crisis spreads
“Never easy to make such a decision. Wishing them and all those impacted the best as they navigate this,” tweeted Farzam Ehsani, CEO of rival exchange VALR, in response to news of the staff layoffs at Luno.
Last year Luno announced that it had passed the 10 million customer mark, spread over more than 40 countries. The company previously announced its ambition to grow its customer base to one billion.
Read: Luno sets target of a billion customers in 10 years [Nov 2020]
The company pioneered crypto investment in SA. Launched in 2013 from offices in Cape Town, it offered a simple way for customers to invest in bitcoin, gradually adding more cryptocurrencies as demand for so-called altcoins grew.
While other exchanges sprang up in SA offering a greater variety of cryptos, Luno stuck to offering customers a limited number of the most popular crytpos. It has been an advocate for regulation and honest advertising in South Africa, which has earned a reputation for being a nursery for crypto scams such as Mirror Trading International.
Earlier this week, the Advertising Regulatory Board (ARB), assisted by Luno and other crypto players, introduced new rules requiring crypto companies to include warnings about the potential for loss of capital when advertising their crypto products and services.
Read: New advertising rules require warning label over crypto investments
In January 2023 alone, nearly 2 000 jobs have been shed by 11 crypto companies.
This is on top of more than 27 000 jobs lost in 2022, with some of the biggest layoffs announced by Coinbase (950), Kraken (1 100), Meta Platforms (11 000), Crypto.com (700-900), and payments processor Strip (more than 1 000).