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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please review our website policy before making any financial decisions.
Historically, crypto assets have been largely unregulated in South Africa. The very first public statement on cryptocurrencies in the country was released by its National Treasury in 2014, and it was limited only to warning of the risks associated with this speculative market.
However, that position is changing as South Africa’s financial watchdog aims to introduce regulations into the digital asset space. South Africa’s Intergovernmental FinTech Task Force (IFWG) is calling for regulation of the country’s cryptocurrency ecosystem, according to a position paper released on Friday.
South Africa’s regulatory recommendations for digital assets
South Africa has laid the groundwork for its financial watchdog (IFWG) to bring crypto-assets under its regulatory jurisdiction and, as it is claimed, “in a phased and structured manner.” According to the position paper, regulatory recommendations are grouped into these three general categories:
Implementing the AML / CFT Framework: South Africa has already started work to incorporate Crypto Asset Service Providers (CASPs) into the list of responsible institutions. Once the PSAPs have been added to this list, they will have to comply with the legislative requirements aimed at combating money laundering and the financing of terrorism (AML / CFT). Cross-Border Financial Flows Supervision Framework: The IFWG says it requests the Financial Supervision Department of the South African Reserve Bank to “assume the supervisory and regulatory responsibility for the supervision of cross-border financial flows with respect to concerns crypto assets and PSAPs. In addition, the IFWG stipulates that all transactions to purchase cryptocurrencies abroad must be reported in a specific balance of payments (BOP). Financial sector law enforcement: The IFWG requires that crypto -assets are reported as financial products. Therefore, crypto-asset service providers would be required to become “authorized intermediaries and provide advice by such entities.” Join our Telegram group and stay connected to all things related to the crypto, DeFi and finance Is the amount of regulations reasonable?
After the collapse of Mirror Trading Investments (MTI) in December 2020, which had raised more than 23,000 from investors and was named the world’s largest crypto investment scam, South Africa warned that it would regulate cryptocurrencies with more power to prosecute fraudsters.
The news was quite frightening for the crypto industries, as fear of regulatory crackdown in the country convinced some cryptocurrency startups to seek more user-friendly environments. But now, as the basics of regulation are revealed, was their fear justifiable?
By zooming out on the proposal document, it is easy to perceive that the regulations are very restrictive. For example, to comply with AML / CFT requirements, all crypto asset service providers must:
Register with the Financial Intelligence Center (FIC) Perform customer identification and verification Maintain customer records and transactional information Continuously monitor suspicious and unusual activity Report to the FIC Report cash transactions of R 25,000 ( ~ $ 1,839) and more.
In addition to this, crypto-asset service providers must also develop, document, maintain and implement a risk management and compliance program, and train employees in AML / CFT compliance.
At first glance, such massive regulations dramatically increase the costs and problems of running a crypto startup, while significantly demoralizing crypto startups and crypto users. It remains to be seen whether crypto exchanges will adopt these new regulations or choose to move to a more regulatory-friendly environment, as Revix recently did.
Do you think South Africa imposes excessive regulations? How will this new regulatory policy affect the country’s adoption of crypto? Let us know what you think in the comments below.
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About the Author
Tim Fries is the co-founder of The Tokenist. He has a BSc in Mechanical Engineering from the University of Michigan and an MBA from the Booth School of Business at the University of Chicago. Tim was a Senior Associate in the investment team of RW Baird’s US Private Equity division and is also a co-founder of Protective Technologies Capital, an investment firm specializing in detection, protection and protection solutions. control.
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