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there is a risk that the technology may have moved so much by the time the legislation is enacted, that the legislation is obsolete or requires updating almost immediately to align with the latest technology”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.

SEC Fines Steven Seagal for 'Unlawfully Touting' ICO in 2018

Action star Steven Seagal has been fined by the U.S. Securities and Exchange Commission (SEC) for “unlawfully touting” an initial coin offering (ICO) conducted by Bitcoiin2Gen (B2G) in February 2018.

According to a statement published by the SEC, Seagal failed to disclose he was offered $250,000 in cash and an additional $750,000 worth of B2G tokens in exchanges for promoting the ICO. His promotion included telling his fans on social media to not “miss out” on Bitcoinn2Gen’s ICO, and a press release titled “Zen Master Steven Seagal Has Become the Brand Ambassador of Bitcoiin2Gen.”

The SEC details that one press released quoted Seagal saying he “wholeheartedly” endorsed the initial coin offering. The promotions came after, in 2017, the SEC warned that cryptoassets sold via ICOs could be securities, and after it advised that celebrities or other individuals who promote cryptoassets that are secure should “disclose the nature, scope, and amount of compensation” they receive for it.

Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit, was quoted as saying:

These investors were entitled to know about payments Seagal received or was promised to endorse this investment so they could decide whether he may be biased.

Littman added that celebrities aren’t allowed to use their social media influence to promote securities “without appropriately disclosing their compensation.” The release adds that without admitting or denying the SEC’s findings, Seagal agreed to pay $157,000 in disgorgement representing his actual promotional payments, plus prejudgement interest, and a $157,000 penalty.

Moreover, Seagal agreed to not promote any securities for three years. The SEC added at the end of the release that its Office of Investor Education and Advocacy cautions investors to be wary of celebrity endorsements and to always independently research any investment opportunity.

Other celebrities have been charged with “unlawfully promoting” ICOs, including boxing legend Floyd Mayweather and DJ and music producer DJ Khaled for “failing to disclose payments they received for promoting investments  in initial coin offerings.”

Featured image via Pixabay.