South Africa’s Regulatory Move on Cryptocurrency
In a decisive move towards regulating digital currencies, South Africa is drafting an upcoming guideline specifically designed for cross-border cryptocurrency transactions. Instead of implementing a sweeping exemption framework for cryptocurrency exchanges, the South African Reserve Bank (SARB) is set to unveil this new framework later in the year, focusing on transactions involving crypto assets across borders.
Government Commitment to Regulation
Finance Minister Enoch Godongwana made these remarks in response to queries from lawmaker Wendy Alexander during a Standing Committee on Finance meeting, emphasizing the government’s commitment to establishing regulatory measures in this expanding financial sector.
Addressing Regulatory Gaps
Following a High Court decision that criticized the application of outdated apartheid-era regulations on crypto assets, the landscape for these transactions in South Africa has remained largely unregulated. To address this gap, the SARB is currently in discussions with the National Treasury and the Financial Sector Conduct Authority (FSCA) to finalize guidelines that will oversee the activities of crypto asset service providers (CASPs) as they engage in sending and receiving values internationally through cryptocurrencies.
Key Aspects of the New Framework
The forthcoming framework is expected to delineate key aspects such as parameters for transactions, responsibilities of various parties involved, and necessary reporting obligations aimed at curbing regulatory loopholes and potential illegal financial activities. Godongwana highlighted that the National Treasury is working closely with SARB to enhance the existing exchange control legislative framework to support the implementation of this new initiative.
Collaborative Efforts for a Cohesive Environment
Together with the Financial Regulators Steering Committee—which includes the SARB, FSCA, and the Prudential Authority—the Treasury will facilitate ongoing discussions to ensure a cohesive regulatory environment.
Addressing Risks in the Cryptocurrency Market
In light of the inherent risks associated with cryptocurrencies, as outlined in a position paper by the Intergovernmental Fintech Working Group (IFWG), Godongwana’s comments reflect an assertive stance by the South African government. Their collaborative efforts with financial authorities are aimed at fortifying the regulatory framework to better address the complexities of the evolving cryptocurrency market in South Africa.
