In 2020, the biggest crypto scam globally was attributed to a South African company called Mirror Trade International (MTI), a bitcoin trading platform, which took in more than $589 million worth of bitcoin from users before it went missing.
In April 2021, another investment firm dealing in cryptocurrencies, Africrypt, claimed that $3.6 billion was lost after it was hacked. Following an outcry, the financial sector watchdog, Financial Sector Conduct Authority (FSCA), said it was “powerless” to pursue the matter.
As a result of all this, now the South African government is intensifying efforts to regulate such services.
The country expects to have a “regulatory framework” in place in 3 – 6 months. However with one of the hallmarks of cryptocurrencies being decentralization, regulation will continue to be a thorny subject.
According to Kuben Naidoo, the Deputy Governor, The Reserve Bank of South Africa (Central Bank in South Africa):
“We are trying to put in place the regulatory framework quickly.
Our view is that crypto is a financial product, and should be regulated as a financial product.
Now we are defining this as a financial product and if there are scams where the public is being duped, given incorrect or false information, it is certainly a market conduct issue that should be taken seriously.
We are of the view that cryptocurrencies are risky and we want to ensure that the financial sector is aware of those risks and pricing for those risks properly.”
– Deputy Governor, Reserve Bank of South Africa (RBSA)
Under this approach, financial sector laws are likely to be introduced, as well as rules to monitor money-laundering and cross-border flows. While some operators are wary about the upcoming regulation, several operators welcome it since bad players are damaging the nascent sector’s reputation.
This comes amidst tougher government measures globally towards cryptocurrencies.
This week, the U.K’s Financial Conduct Authority (FCA) issued a ban on operations of Binance, the largest crypto exchange globally, in that country.
In China, Huobi, a major exchange has stopped offering derivatives trading to its users following pressure from the government.
It is likely that other African countries will follow South Africa’s approach when it comes to crypto legislation and regulation.