South Africa Plans To Regulate Cryptocurrencies

The South African Reserve Bank has said it is planning to regulate cryptocurrencies after initially not wanting to get involved.

“Our view has changed and we now do regard (cryptocurrency) as a financial asset and we hope to regulate it as a financial asset,”

– SARB deputy governor Kuben Naidoo said on Wednesday during a webinar. However, the regulation is not likely to happen very soon.

“It will probably still take us around 12 to 18 months to get all of our ducks in a row,” – Naidoo said.

Responding to a question on whether South Africa has fallen behind with crypto regulation, he said this is not the case.

“We are pretty much in the middle of what most central banks (and) regulators are doing. We follow pretty closely what advanced economies (such as) the UK, Singapore, and Australia are doing with a lead on the technology front. We are watching them very closely,” – Naidoo said.

He said most central banks are now focusing on regulating the crypto environment and South Africa is learning how it can take some of those lessons.

“There has been a lot of money that has flowed in, and there is a need to regulate it and bring it into the mainstream in an orderly fashion but in a way that balances the excitement and hype with the investor protection requirements – that is critical.”

– Naidoo said at the webinar organized by financial technology company PSG.

Outlining the steps that the SARB would need to take in the process, Naidoo said the first is to declare cryptocurrency a financial product. “The second is to establish a regulatory framework for the exchanges and they would have to comply with exchange control laws and tax laws.” – Naidoo said sellers would also have to give a “health warning”.

“They would have to tell the buyer that you could lose money; that this is not a bank deposit. Essentially you would be able to buy and sell crypto as it is on the exchange,” – he said.

But there were also risks that included money laundering, Naidoo said as he cited US information that 90 percent of crypto transactions were used in the drug and gambling industry because users preferred anonymity.

“Most use cases for crypto globally have not been an honest one. You’ve seen it being used as ransom in ransomware attacks and kidnappings. That’s what we are trying to solve because we’ve got a responsibility towards the public with rules. We’ve seen the hard evidence when we don’t do that properly. There’s currently no protection for South Africans who buy cryptocurrencies,”- he said.

Although South Africans have been avid buyers of cryptocurrencies, in recent months there have been reports of investors losing a lot of money, including through local scams which are now under the scanner of financial authorities.

Source: outlookindia.com

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