South Africa's Reserve Bank: Cryptos Could 'Materially Impact' Traditional Financial Sector

South Africa’s reserve bank (SARB) recently published a consultation paper in which it noted that a comprehensive set of regulatory guidelines must be created for cryptoassets - as they have the potential to play a key role in the world’s economy.

The country’s National Treasury (NT) had issued an “initial public statement” on cryptoassets in 2014. The statement warned that “no legal protection, or recourse is offered to users of, or investors in, cryptoassets.”

In 2014, South Africa’s National Payment System department and the SARB had also cautioned the nation’s citizens about the use of digital currencies in “money laundering and the financing of terrorism.” Clarifying its stance regarding cryptoassets, the SARB mentioned in a position paper that it “does not oversee, supervise or regulate the crypto assets landscape, systems or intermediaries.”

Current Regulations Don't "Sufficiently Address The Phenomena Of Cryptoassets"

Because cryptocurrencies were not recognized as legal tender and were not regulated in South Africa, the SARB had warned that “all activities related to the acquisition, trading or use of cryptoassets are done at the end users’ sole and independent risk, with no recourse.” Last year, South African officials established a joint working group to “specifically review the [country’s] position on cryptoassets.”

SARB’s consultation paper states that “the need to develop a policy and regulatory response to cryptoasset activities in South Africa is driven by” the potential of blockchain-based currencies and tokens to “materially impact [traditional] financial services.” The paper also mentions that the current global financial regulatory framework does not “sufficiently address the phenomena of cryptoassets”, which makes it necessary to create regulations specifically for digital currencies.

In order to create policies and guidelines for cryptocurrencies, South Africa’s working group assessed the “economic function” of the new asset class (“rather than the specific technology applied or the entity involved”). According to the group’s research and analysis of crypto markets, regulations should be created for crypto-related activity involving payments, initial coin offerings (ICOs), “crypto derivatives and funds”, and “market provisioning.”

60% Of South Africans Unaware Of Cryptocurrencies

The SARB will reportedly be publishing a policy paper (during Q1 2019) on how crypto wallet and exchange services will be required to register with the nation’s authorities. As explained in the consultation paper, the registration process would help protect cryptocurrency investors. South Africa’s government also plans on collecting taxes on crypto-related earnings, which is another reason for requiring registration.

SARB’s consultation paper will remain open for public comment until February 15th, 2019. The reserve bank may be contacted via email: [email protected]

As CryptoGlobe reported in mid-July 2018, financial services firm Old Mutual had conducted a survey which revealed that the majority -  60% - of South Africans were not aware of cryptocurrencies. Notably, 43% of the nation’s residents that had heard of cryptocurrencies also thought they were some type of pyramid scheme.