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The South African Reserve Bank is set to bring cryptocurrencies into the regulatory oversight of the Financial Sector Conduct Authority (FSCA), signalling the first serious move by the Bank to regulate the burgeoning space.
Speaking at a recent PSG-hosted webinar, deputy Reserve Bank governor Kuben Naidoo said the Bank’s thinking on crypto has evolved and it now views it as a type of “asset” that should be regulated as such.
The Reserve Bank is “actively considering” taking two immediate steps aimed at reducing the risk of cryptocurrencies to evade existing regulations. The first of these steps is to bring crypto into the regulatory regime of the FSCA and for the Financial Intelligence Centre to list it as part of a schedule under the Financial Intelligence Centre Act.
The second step is developing a regulatory framework for cryptocurrency exchanges and platforms that includes KYC (know your customer) protocols, as well as exchange control and the applicable taxation laws.
In addition, cryptocurrencies should come with a “health” warning, indicating that the potential to lose money should be taken seriously and that owning cryptocurrency is not the same as making a bank deposit, Naidoo said. However, the role of the regulations will not be about helping users to mitigate market risks, or to “pick winners and losers”.
Introducing regulations should go a long way in curbing the impact of money laundering and helping platforms to build systems that are safe and trustworthy, Naidoo said.
No ‘big bang’
Rather than expecting a “big bang” approach to regulation of cryptocurrencies, South Africans should expect a steady and consistent influx of regulatory messages in the coming months as regulation begins to take shape.
Naidoo said he does not regard cryptocurrencies as a serious challenger to the authority of the Reserve Bank as the technology is still developing and digital currency is still too volatile to be widely used as a means of payment.
However, he warned that crypto is used extensively for money laundering and other illicit activities. “Crypto is being used by cyber criminals to demand ransoms, and to fund cross-border kidnappings and other international crimes.”
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