The Financial Sector Conduct Authority (FSCA) says the draft regulatory framework for the regulation of the crypto-currency industry in South Africa will be finalised “very soon”.
Last month, the South African Reserve Bank (SARB) announced it was working to introduce a regulatory framework to govern crypto transactions.
The announcement came almost six years after the central bank of South Africa had initially taken a stance not to regulate the crypto-currency industry, as it is classified as an asset, rather than a currency.
After re-examining its previous position, SARB noted it has now reconsidered its stance, having taken steps to regulate crypto as a financial asset – an initiative it is embarking on in collaboration with the Intergovernmental Fintech Working Group (IFWG).
IFWG is made up of regulators and policymakers of the financial technology sector, including FSCA, SARB, South African Revenue Service and the Competition Commission.
Speaking during the recent Money Smart Week SA webinar held by National Treasury, Lyndwill Clarke, head of consumer education at the FSCA, provided an update on the regulatory framework.
“While we cannot provide time-frames on when the regulatory framework will be finalised, what we do know is the framework will go out for consultation first. We are in the process of finalising it and it will be published for consultation very soon.”
SA’s approach to the regulation of crypto will be conducted in a systematic and phased manner, he noted.
Being published for consultation, input and feedback from stakeholders within the financial sector, especially those that are in the crypto industry, will add much value in providing a guideline to the framework, he added.
Lyndwill Clarke, head of consumer education at the Financial Sector Conduct Authority.
“There are obviously various aspects to the framework, and the publication itself will be a joint publication from the Prudential Authority (financial sector regulator) as well as from the FSCA.”
With the crypto space maturing rapidly, regulators around the world are accelerating efforts to either embrace or regulate crypto-currencies.
Kuben Naidoo, deputy governor of the SARB, previously stated that the new crypto regulations would play a key role in ensuring investor protection and confidence by ensuring adherence to anti-money-laundering legislation and exchange controls.
“The use of crypto for money-laundering and other illicit activities is a source of concern. 90% of transactions involving crypto-currency in the US are for the purchase of opioids or gambling tokens,” he pointed out at the time.
In just a few years, the adoption of crypto, as well as the entry of new players into the South African market, has sky-rocketed.
Over the last 12 years, the global crypto asset ecosystem has grown to include more than 10 000 unique crypto assets, according to the IFWG.
Daily trading values have also increased significantly over the past few years – currently averaging in excess of $200 billion, and on some days exceeding $400 billion, says the group.
While the crypto hype has led to some exciting developments in the redefining of ownership and value transfer, it also has many adverse effects.
Last week, the Prudential Authority issued a guidance notice, urging the big-four banks to start working with crypto players.
The guidance notice came after some local big banks shut down the accounts of crypto-currency exchanges, largely fearful of the potential risks they present.