South Africa’s Regulation on Cryptocurrencies

Written by jamie

August 24, 2020

The Interdepartmental Fintech Working Group (IFWG) which comprises of the South African Reserve Bank, the National Credit Regulator, the Financial Sector Conduct Authority (FSCA), the national treasury and the South African Revenue Service and Financial Intelligence Centre (SARSFI) released a paper draft of its policy position on crypto assets back in May of this year.

While cryptocurrencies are well known for their pseudo-anonymity nature and lack of control from the government and financial institution, the paper provides recommendations on a regulatory framework for the assets including a proposal on changing existing regulations in order to include these digital assets.

The IFWG paper makes reference to illegal tax avoidance, criminal activities, and the financing of fear-based oppression such as terrorism which are the fundamental issues confronting regulators.

In other words, all the involved participants in the crypto industry are needed to register as crypto asset service providers (Casps), and this includes vending machine providers, crypto tokens issuers, trading platforms, providers of digital wallets and custodial service providers.

As indicated by the IFWG paper, this will incorporate “conducting due diligence of the customer, verifying the customer’s identification, keeping records, observing for dubious and bizarre behaviours on a progressing premise, answering to the Financial Intelligence Center any dubious and irregular exchanges, announcing money exchanges of R25 000 or more (or the relevant threshold at some random time), and detailing in regard of control of property that may be connected to fear-mongering actions or terrorist groups”.

Advantages

The implementation of these proposals from the paper will have consequences for digital forms of currencies as it carries a large group of guidelines to an industry that highly esteems itself as being outside the conventional regulated financial markets.

While it’s timing and implementation isn’t clear, proactive crypto organizations should begin to consider what this implies for their organizations and maybe to even willfully begin to actualize identification and verification forms for their customers, in accordance to the FIC Act.

This could help avoid disturbance to a crypto business’ operations once the enactment is at long last revised as the regulators believe that, this methodology is under compliance practices and good corporate governance.

By tying this present reality characters of crypto proprietors to virtual resources going through agreeable networks, the crypto business will have the option to get it together. Trades and investors can more than readily recognize virtual monetary standards from those corrupted by tax evasion and terrorism activities among other criminal behaviours.

All partners will have the option to follow the sources of crypto as more confirmed certifiable personalities begin to use the blockchain. This will drive criminals to underground commercial marketplaces, where their virtual resources will either exist in a hazy legal situation or in away far from the law.

This vulnerability will make unregulated resources less fungible and along these lines lower in value.

Disadvantages

Without a doubt, the decentralized nature of cryptographic forms of money has for some time been viewed as something worth being thankful for by crypto enthusiast who wishes to stay as mysterious and anonymous as much as possible.

Regulation is frequently observed as a cloudy word within the crypto community, particularly when one considers the visionary standards set out in the Satoshi Nakamoto’s Bitcoin whitepaper. The ideological was to make a money related framework that depended on no outsider, nor directed by outside institutions, for example, governments or national banks. Thus, Bitcoin devotees requested a platform that was liberated from external obstruction.

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