The public of South Africa have until February 15 to make submissions on policy and regulatory proposals for crypto assets, according to a recent report. The South African Reserve Bank (SARB) have invited the public to submit comment on a consultation paper which sets out proposals for cryptocurrency regulation. The regulatory framework will be developed over three phases, with the first phase, a registration process for crypto asset service providers, being implemented in the first quarter of 2019. Among the proposals is that crypto assets remain without legal tender status and are not sanctioned as electronic money.
In 2016, the Intergovernmental FinTech Working Group (IFWG) – consisting of members from National Treasury, the Reserve Bank, the Financial Sector Conduct Authority and the Financial intelligence Centre – was set up to develop an understanding on fintech developments and their implications on regulations and policy.
South Africa Observing Cryptocurrency Developments For Some Time
The Reserve Bank of South Africa has been observing developments in the cryptocurrency space for some time and has resolved that there is a need to develop a policy and regulatory response to crypto asset activities in South Africa. This commitment is driven by the following:
Crypto assets are a form of innovation that may impact the financial sector of the country
Crypto assets do not fit neatly within the current regulatory framework
Crypto assets may create conditions for regulatory arbitrage while posing risks.
There is growing interest, investment and participation in crypto assets
The IFWG and the Crypto Assets Regulatory Working Group have agreed that regulations should ensure the “safety and efficiency” of the financial system and financial institutions, ensure consumer and investor protection, combat illicit financial flows, money laundering and the financing of terrorism and tax evasion.
The consultation paper notes the regulatory challenges associated with cryptocurrencies and points out that South Africa does not view crypto assets as money, but it may at times “perform certain functions akin to those of money, albeit imperfectly”. It continues, “crypto assets may also function as securities, assets or commodities”.