South African regulators have published a position paper confirming that crypto assets will be brought into South African regulatory purview.
The position paper confirms that crypto assets will be brought into the South African regulatory scope in a phased and structured manner.
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SEE ALSO: South African Revenue Service (SARS) Requests for Customer Information from 3 Crypto Exchanges
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The paper, published by the Intergovernmental Fintech Working Group (IFWG) makes 25 recommendations on how to bring crypto assets into the South African regulatory remit in a phased and structured approach across 3 main areas:
- Anti-money Laundering and combating the financing of Terrorism (AML / CFT) – The revised standard now explicitly requires jurisdictions to regulate crypto assets and crypto asset service providers (CASPs) for AML/CFT purposes
- Cross-border Financial Flows – From an exchange control perspective, the current Exchange Control Regulations do not explicitly cater for crypto assets, with the implication that the SARB’s Financial Surveillance Department (FinSurv) does not have explicit powers to require South African crypto asset trading platforms to report transactions involving crypto assets.
- Application of Financial Sector Laws – Recent schemes highlighted in the media emphasize the need for the South African authorities, predominantly through the FSCA, to take action against the growing tendency for market abuse under the guise of crypto assets
According to IFWG, regulating crypto assets will enable regulators to have a ‘line of sight’ of cypto-related activities and developments as the potential for such assets is likely going to increase especially with unregulated parallel systems.
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However, the regulators put out this cautionary statement saying:
“It is reiterated that amending the collective South African regulatory stance on crypto assets should not be interpreted as any type of endorsement of crypto assets.
Rather, the decision to formally bring crypto assets within the domestic regulatory remit was driven by a combination of:
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- Market developments, including strong retail interest in crypto assets and the resultant need to protect consumers to the extent possible
- The growing challenge experienced by regulators to maintain line of sight of crypto asset-related activities in the absence of a regulatory framework and the associated compulsory reporting and information requirements and
- Relevant developments and amended requirements imposed by international standard-setting bodies such as the FATF and the Basel Committee on Banking Supervision”
– IFWG
The position paper on crypto assets essentially provides a roadmap for putting in place a regulatory framework for crypto assets through the regulation of CASPs in South Africa.
The paper also serves to initiate the process for the individual financial sector regulators to implement the recommendations therein.
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Read / Download the press release here
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About IFWG
IFWG works with South African financial sector regulators to demystify the regulatory landscape while providing a space for safe experimentation 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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RECOMMENDED READING: The South African Reserve Bank Commences Feasibility Study for a General-Purpose Central Bank Digital Currency
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