South African regulators are now rethinking how they classify cryptocurrencies following the high levels of retail interest in crypto in the country.
On Friday, South Africa’s Intergovernmental Fintech Working Group (IFWG) published a paper laying out a roadmap for introducing a regulatory framework that will center on crypto asset service providers.
In 2014, the National Treasury issued a statement warning the public that it could trade crypto at its own risk and would be offered no legal protection or recourse in case of issues. However, with the South African crypto market surging to an excess of 2 billion rand ($147 million) in daily trade value earlier this year - this former policy policy cannot be maintained no longer.
The paper explains that whilst a regulatory framework is set to be phased in, crypto still remains “inherently risky and volatile” and prospective financial losses due to crypto trading activity are very high.
The paper explains six principles that will aid in the approach; implementing measures proportional to risk; taking a collaborative approach to crypto asset regulation; encouraging digital financial literacy; staying up to date with international best practices; and taking an “activities-based perspective.”
Additionally, the paper puts forward 25 recommendations for how to regulate crypto in relation to Anti-Money Laundering and Combating the Financing of Terrorism, cross-border financial laws and the application of financial sector laws.
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- Kayla Izenman, Research Fellow, Centre for Financial Crime and Security Studies, Royal United Services Institute (RUSI)
- David Carlisle, Director of Policy and Regulatory Affairs, Elliptic
- Siân Jones, Senior Partner, XReg.Consulting