South Africa Takes First Steps Towards Crypto-Regulatory Framework
South Africa’s financial regulators release a document detailing the country’s cautious yet welcome stance towards the inclusion of cryptocurrency as a medium for transactions.
Last Tuesday, the South African Intergovernmental Fintech Working Group (IFWG) and the CAR WG released a document outlining several recommendations for the development of a new crypto-regulatory framework. While the country has kept a cautious eye on the development of cryptocurrency since 2014, the paper acknowledges that local supervisory efforts to make transactions safer and more secure have been lacking.
South Africa is one of many countries around the world that have a strict regulatory stance for cryptocurrency. However, the country generally maintains a neutral stance to its presence. While the paper outlines a stringent set of recommendations for crypto asset providers, relevant authorities, merchants, and clients to follow, it does not altogether ban the presence of crypto transactions within its borders.
The paper recommends that entities providing cryptocurrency asset services become formally recognized as Crypto-Asset Service Providers (CASPs) and be required to register to the Financial Intelligence Centre (FIC). In exchange for this recognition, this obliges all CASPs to adhere to requirements on anti-money laundering and KYC.
One aspect of the recommendation included the need to store information regarding originators and beneficiaries in a crypto asset transaction, as well as to make this available to appropriate regulatory and/or law enforcement authorities upon request.
The paper also advised the implementation of an enhanced monitoring program for the CAR WG, with emphasis on market capitalization, number and client base of crypto-asset trading platforms as well as the services they provide, merchants or retailers accepting crypto payments, the volume of crypto asset transactions, and cross-border crypto-transactions.
The paper recommends that crypto assets remain as is, without legal status, and should not be recognized as a form of e-currency.
Regarding payment using crypto assets, the paper states that “the use of crypto assets for payment purposes may be considered, and maybe tentatively allowed at the user’s own risk.” This is followed by advice for reviewing the National Payment System (NPS) Act.
Finally, Initial Coin Offerings (ICOs) have been acknowledged as a legitimate source of funding for small businesses. The paper states that “ICOs as a means of raising capital is accommodated within the regulatory framework for start-up firms to raise capital.”