South Africa To Establish Self-Regulatory Unit To Oversee Crypto Industry

Pratik Makadiya
  • South Africa is set to establish a self-regulatory unit to oversee the cryptocurrency industry
  • The country expets its taxpayers to declare cryptocurrency earnings, despite cryptos not being legal tender.

South Africa´s central bank, the South African Reserve Bank (SARB), is instituting an independent self-regulatory investigative unit - nicknamed Project Khoka – to oversee the crypto space.

The new non-state agency will be authorized to set up new laws and industry standards. The SARB opted for a self-regulatory approach to ensure that the crypto industry advances while keeping risks at a minimum

Bridget King, Director of Banking Practice at the central bank, told Finextra

“Regulating cryptocurrencies prematurely could have the negative consequence of throttling the growth and innovation of the industry”

Bridget King

According to King, cryptocurrencies cannot be regulated under the same class as traditional banking services. Therefore, the newly formed self-regulatory unit is set to develop new regulations for the crypto space.

 Moreover, per King, the crypto space is in its emerging phase and will undoubtedly advance. Hence, regulations will only need to be updated as the industry progresses.

“In addition, if laws are drafted based on existing technology, which is still in its growth phase, there is a risk that the technology may have moved so much by the time the legislation is enacted, that the legislation is obsolete or requires updating almost immediately to align with the latest technology”

Bridget King

South Africa To Tax Crypto Gains

Project Khoka’s primary task will be to analyze the use of blockchain technology in electronic payments. Earlier this year, SARB formed a fintech task force that would confront regulatory subjects such as monetary policy and financial stability. Project Khoka is a spin-off of that fintech task force.

Cryptocurrencies gained extensive popularity in South Africa last year. According to CryptoCompare data, the South African Rand makes up for roughly 0.01% of Bitcoin’s trading volume, as about 444 bitcoin were traded against the fiat currency in the last 24-hour period.

Recently, South Africa’s tax authority, the South African Revenue Service (SARS), revealed it expects taxpayers to declare cryptocurrency gains, although cryptos aren’t legal tender in the country.

$100 Million Crypto Startup 'Liquidated' By Swiss Regulators, 'Illegal Activity' Confirmed

Envion, a Zug, Switzerland-based firm focused on developing “mobile blockchain mining” software, has been accused of “unlawfully receiving deposits” from approximately 37,000 investors.

According to a report published on March 27th, 2019 by SwissInfo.ch, Envion’s management “unlawfully accepted over CHF90 million ($90.5 million)” through its initial coin offering (ICO). The firm reportedly did not have the required “statutory license,” however it still took money from “more than 37,000 investors” - who purchased Envion’s EVN tokens. Payments to Envion were made in USD, Ether (ETH), and Bitcoin (BTC).

FINMA: Envion Did Not Have Banking License Yet Still Accepted “Public Deposits”

Swiss Financial Market Supervisory Authority (FINMA), Switzerland’s financial regulator, has determined that accepting the payments “qualified as public deposits” under the nation’s Banking Act. In order to accept such payments, the Act requires that Envion (or any other firm) hold a banking license.

In addition to not having a banking license, FINMA revealed that Envion’s management did not issue the company’s EVN tokens “under the same conditions to all investors.” Moreover, FINMA found that there was “no international audit unit” - which is a requirement under Switzerland’s financial laws.

Feeling “Totally Exonerated” As All Proceedings Seemingly Come To An End

As noted by local news outlets, Envion is “now in liquidation” and FINMA will “not be taking any further action.” Notably, the “details of the bankruptcy proceedings” have not been disclosed, however they are currently being overseen by Zug’s bankruptcy office.

In response to FINMA’s investigation, Matthias Woestmann, the former CEO at Envion, said that the financial regulator had “not identified any misappropriation of the assets entrusted to the company.” Woestmann added that he was relieved because it seems as if there may be no further charges against him or Envion’s board of directors.

Woestmann also felt “totally exonerated” as he believes it’s “the end of the proceedings” against him and the firm’s board members. The former CEO told reporters that he hopes the funds will be returned to the investors as soon as possible.

Alleged New York Fraudster Indicted By US Department Of Justice

In a seemingly more serious crime, a New York-based crypto scammer is facing 9 different charges as he has been accused of stealing almost $200,000 from unsuspecting investors. The 46-year-old Staten Island resident has been charged by the US Department of Justice (DoJ) for “using smoke and mirrors to allegedly dupe investors into paying his company—CabbageTech, for advice and strategies on cryptocurrency trading.”

The defendant, named Patrick K. McDonnell, had allegedly been soliciting investments on Facebook and Twitter. However, the DoJ revealed in a press release (published on March 26th, 2019) that the “defendant reportedly stole the money for personal use.”