South Africa Proposes Strict Crypto Regulatory Framework

South Africa’s financial regulators recommended that cryptocurrency be used for domestic payment purposes, but that it not be treated as legal tender or allowed as a settlement tool.

Apr 17, 2020 at 6:30 a.m. UTC
Updated Sep 14, 2021 at 8:30 a.m. UTC

South Africa’s financial regulators recommended cryptocurrency “remain without legal tender status” in a Tuesday roadmap outlining what could become the nation's first comprehensive crypto laws. 

According to the policy paper by South Africa’s “Intergovernmental Fintech Working Group” (IFWG), the burgeoning crypto asset sector – one survey suggests 10.7 percent of South African internet users invest in bitcoin – is past due for strict financial oversight, a licensure structure, closer cash flow monitoring and more. 

“Crypto assets and the various activities associated with this innovation can no longer remain outside of the regulatory perimeter,” said the IFWG, whose members include the South African Reserve Bank, the Financial Sector Conduct Authority and the National Treasury, among others. “Clear policy stances” must be formed. 

The policy paper would implement strict crypto oversight domestically. It would codify the Financial Action Task Force’s “new technologies” anti-money-laundering and “Travel Rule” recommendations, two international baselines for policing crypto businesses. Those businesses would also need to register with the AML watchdog the Financial Intelligence Centre. 

Crypto would face new formal restrictions on when and how it can be used. For example, the policy paper calls for a prohibition against using crypto as a settlement tool within South Africa’s financial infrastructure, but asks that crypto be recognized “for domestic payment purposes,” and be regulated accordingly.

“Payments using crypto assets will, in the interim period, be subjected to a regulatory sandbox approach,” the IFWG said.

On the matter of raising capital, the paper says Initial Coin Offering regulations “must be aligned, as far as possible” with South Africa’s traditional securities governance schemes. Even so, payment and utility tokens would also have to submit their white papers to the regulators.

The policy recommendations follow IFWG’s previous crypto consultation paper, issued in Jan 2019. IFWG’s newest recommendations are open for comment through May 15.

The Festival for the Decentralized World
Thursday - Sunday, June 9-12, 2022
Austin, Texas
Save a Seat Now

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Trending

1
CoinDesk - Unknown
First Mover Asia: Terra's Difficult Post-Collapse Path: VCs Backing Away, Regulators Jumping on Stablecoins

Some investors see salvageable pieces in the rubble while others are bemoaning their involvement and want to forget the protocol ever existed; bitcoin edges up in weekend trading.

Some investors see salvageable pieces in the rubble while others are bemoaning their involvement and want to forget the protocol ever existed; bitcoin edges up in weekend trading.

CoinDesk - Unknown
2
CoinDesk - Unknown
China Can’t Seem to Stop Bitcoin Mining

Reported hashrate fell to zero for two months in China last year, but it has since returned rather abruptly.

Reported hashrate fell to zero for two months in China last year, but it has since returned rather abruptly.

CoinDesk - Unknown
3
CoinDesk - Unknown
Could Local Digital Currencies Improve Communities?

That's the argument of the president of the RadicalxChange Foundation.

That's the argument of the president of the RadicalxChange Foundation.

CoinDesk - Unknown
4
CoinDesk - Unknown
After the Terra Meltdown: What's Next for Stablecoins?

The largest token collapse in crypto history. So let Luna die.

The largest token collapse in crypto history. So let Luna die.

CoinDesk - Unknown