Stricter regulations for cryptocurrency in South Africa proposed
The South African Reserve Bank (SARB) has proposed stricter regulations on cryptocurrency in South Africa. The SARB recently released a consultation paper to provide an overview of the perceived risks and benefits associated with crypto asset. It also discusses the available regulatory approaches and presents policy proposals to industry participants and stakeholders. They have argued that cryptocurrencies hold an increased risk for consumers, and therefore require limited regulation.
In their latest consultation paper, the SARB have put forth that there is a need to develop a policy and regulatory response to crypto asset activities in South Africa. According to the SARB, this is necessary because:
- 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
“Given the related risk in crypto assets, it is proposed that South Africa moves to a higher level in 2019,” the report reads.
There are a few risks attached to cyrpto currencies. One risk is that they are a threat to central banking’s right to issue and control money. The report also argues that cryptocurrency opens risk of money laundering and terrorist financing, circumvention of exchange controls and the increase of undetected illicit financial flows.
“In order to achieve anti-money laundering/combating the financing of terrorism (AML/CFT) requirements, more specific requirements will be necessary in line with the recent amendments to the Financial Action Task Force (FATF) Recommendations.”
The report suggests a limited regulation of cryptocurrencies. It argues, “At this proposed level, an official body places specific requirements on providers of certain services in respect of crypto assets, without setting predefined conditions for formal authorisation to provide crypto assets-related products or services.”
“Therefore, in terms of the proposed level, the Financial Intelligence Centre (FIC) will include crypto assets service providers as an accountable institution and, as such, the accountable institutions will be under legal obligation “to comply with AML/CFT requirements in the FIC Act.”
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