The South African Intergovernmental Fintech Working Group (IFWG) has announced the first cohort of the IFWG Regulatory Sandbox and it looks like 3 out of the 4 that have qualified so far are crypto products.
The 4 that qualified were selected out of a a total of 52 applications received that represented a broad range of financial services activities dominated by payments (34), savings and deposits (7), lending (5), and investments (3).
Below is a breakdown of the 4 firms that are currently testing with IFWG as part of cohort 1:
- The People’s Fund – A crowd-investing platform for SMEs that is seeking clarification on the treatment and appropriate framework for the intermediation of crowd-investing platforms
- The Standard Bank of South Africa Limited – The financial institution seeks testing of cross-border foreign exchange transactions reporting submitted to the Financial Surveillance Department of the bank that utilizes blockchain technology. The idea is to verify the reporting is timely and in compliance with regulations and this will happen in parallel with existing reporting processes without impacting on clients
- Investec Bank Limited – The investment bank seeks to test safe custody services for crypto assets through its innovative Digital Asset Vault Offering that provides a secure mechanism for storage and transfer of crypto assets. Investec seeks to test the bank’s regulatory compliance, regulatory reporting processes, and related risk management frameworks
- Xago Technologies – The cross-border remittance service seeks to test the regulatory treatment of crypto assets, specifically Ripple (XRP), in terms of the South African Exchange Control Regulations 1961 used for effecting cross-border transactions between South Africa and the UK and vice versa. Currently, this is subject to certain limits prescribed by the relevant authorities, and Xago seeks clarification on the reporting of such transactions to the relevant authorities as well
While banks seem to have dominated cohort 1, the IFWG said it was pleased with the large number of applications as it is testimoney to the vibrancy and dynamism in the South African fintech landscape.
Speaking on Xago’s acceptance into the inaugural cohort of the sandbox, Mark Chirnside, CEO, Xago, said:
“Xago has been amongst the first to stand in line to work with the IFWG regulators to bring the regulatory treatment of crypto assets under observation and we are proud and honoured to be accepted to participate as it bears testimony to the respect for and the credibility of our company in the domestic and global fintech space.”
– CEO, Xago
The current IFWG Regulatory Sandbox testing phase is expected to last 6 months during which time the innovators will have worked with the various regulators to determine appropriate testing parameters, consumer protection measures and continued compliance with all regulatory requirements during the testing period.
IFWG works with South African financial sector regulators to demystify the regulatory landscape while providing a space forsafe exprimentation and actively advance innovation.
IFWG runs The innovation Hub – a collaborative effort that includes the participation of the following financial regulators in South Africa:
- The National Treasury
- The Financial Intelligence Centre (IFC)
- The Financial Sector Conduct Authority (FSCA)
- The National Credit Regulator
- The South African Reserve Bank (SARB)
- The South African Revenue Service (SARS)
- The Competition Commission
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