SARB intends to regulate crypto
The The South African Reserve Bank (SARB) plans to start regulating crypto in 2023. The purpose of the SARB is to accept cryptocurrencies as financial assets, not currency. Under the proposed new legislation, digital assets would be covered under FICA, SARB deputy chairman Kuben Naidoo so during a webinar.
The improvement of the economies of the countries that regulate cryptocurrencies, actively use them and follow their development, makes the South African Reserve Bank want to regulate cryptocurrencies. The central bank made this decision on cryptocurrencies due to the use of the same approach as Singapore, Australia and the United Kingdom. These countries are closely watched and their steps followed. According to Naidoo, it takes between 12 and 18 months before the legislation is finalized and adopted. So the date we have to wait is between July 2023 and January 2024.
SARB plans: steps to create a crypto legislation
Regulation of cryptocurrencies is a long process. First, the Minister of Finance must amend Schedule 1 of the FICA Act. In the new version of the law, cryptocurrencies are to be categorized as financial assets. Following this categorization, Finanstilsynet should develop a new one regulations for license exchanges.
According to Naidoo, there are two important things that should not be overlooked when making laws: introducing KYC and warning people about risk when trading cryptocurrency. Also, this warning will be made as a health warning. KYC, on the other hand, is needed to prevent things like money laundering, tax evasion, and terrorist use. Trading cryptocurrencies and other blockchain assets will become safer when exchanges collect KYC data from users and report it to the authorities.
The SARB believes it can better protect the estimated 7.6 million crypto holders in SA of regulates the crypto industry. The SARB, which denied cryptocurrencies as digital assets in 2014 and took steps to ban their use, has admitted that what has been done in the past was wrong. Cryptocurrencies are spreading rapidly in South Africa, as are binary options brokers in SA lately, and if action is taken quickly, the use of crypto will become official. Blockchain technology is penetrating more and more industries, so it is important that the regulations are well designed.
Investors will be protected
New laws will be passed primarily to support innovation and protect investors. It is estimated that around 12.5% of the South African population own cryptocurrencies. For those aged 18 to 60, this rate is 22%. This means more than 7.6 million crypto users, as we just mentioned. 65% of crypto investors in the country see cryptocurrencies and DeFi as the future of finance.
72% of crypto enthusiasts rely on social media posts for DeFi related information. Posts shared on social media platforms are an important resource for South Africans. The regulation will cover both individuals and companies providing brokerage services, and individuals providing investment advice involving cryptocurrency. Compliance with the global guidelines set by the Financial Action Task Force will be mandatory for both companies and individuals. Anyone giving cryptocurrency investment advice on social media will be legally responsible for their advice.
South Africa’s National Treasury budget review, published in February 2022, officially started the process of recognizes cryptocurrencies as financial products. Once the regulation for exchanges is complete, it will be easier to report cryptocurrency transactions. A much safer crypto ecosystem can be achieved with such a framework, according to Naidoo, a member of the SARB’s monetary policy committee.
CBDC is also on the agenda
Kuben Naidoo also spoke about the possibility of South Africa launches a digital central bank currency. Naidoo said the country and the central bank are discussing whether they need it CBDC, and also said that they have completed two pilot applications. The central bank works with CBDC by learning from experience. Naidoo said that the digital currency created in the test environment could not be very productive, stating that they are a few years away CBDC launch.
