Kuben Naidoo, Deputy Governor of the South African Reserve Bank (SARB), recently announced that SARB will introduce a framework to regulate cryptocurrencies, recognising its adoption that is prevalent in South Africa.
Imposing the legislation may take around 12-18 months, after which cryptocurrencies will not be recognised as ‘currencies’ but regulated as ‘assets’.
He also addressed that regulating cryptocurrencies is a need of the hour as there’s a lot of money flowing in the ecosystem, which needs to be brought into the mainstream. Over 22% of the country’s adult population is exposed to crypto, while there are close to 8 million crypto investors in the country alone. With growing adoption, regulation is important.
The regulations, expected to be implemented in about 12 months, will happen in stages.
More Details About South Africa’s Plan
Initially, adhering to the new regulatory environment, cryptocurrencies will be listed as a financial product. Then, crypto exchanges will be required to meet tax and exchange control laws, while displaying a “health warning” that lets the investor know the risk involved in the asset. Along with that, exchanges will need to follow certain know-your-customer (KYC) requirements as well.
Referring to the same, Naidoo said “Once the ministers amend schedule one of the FIC (Financial Intelligence Centre) act, then we can begin to move. It will probably still take us around 12 to 18 months to get all of our ducks in a row, get everything in place. But I don’t think that this has to happen in a big bang. I think we can start to have some KYC rules. We can start to license exchanges,” He also added we are “quite close to finalizing the exchange control rules and requirements.”
The decision was partly influenced by recognising that the cryptocurrency industry is full of “bad apples and good apples”, as per Naidoo. Banning cryptocurrencies isn’t an option because not all projects are Ponzi schemes, and the technology could really benefit the global monetary network if implemented right. And this is why the regulations about to come will recognise cryptocurrencies as financial assets.
Summing it all up, Naidoo commented, “We are not intent on regulating it as a currency as you can’t walk into a shop and use it to buy something. Instead, our view has changed to regulating (cryptocurrencies) as financial assets. There is a need to regulate it and bring it into the mainstream, but in a way that balances the hype and with the investor protection that is critical.”
Monitoring and regulating the sector will help the institutions track actions of money laundering & tax invasions, along with terrorism fundings- which remains a point of argument from the radical front criticising the drawbacks of cryptocurrencies.
The bank is also in the process of introducing a central bank digital currency, which has already completed a couple of phases in a proof-of-concept test. However, it may take a few years for that to materialize.
