South African bank official indicted for spreading misinformation about crypto

The deputy governor of the South African Reserve Bank has been accused of promoting misinformation surrounding the illegal use of cryptocurrencies.

Kuben Naidoo has been called out by Steven Sidley, a South African professor and author, for claiming that “90%” of crypto transactions are used for illegal purposes.

Naidoo’s statements were pulled apart by Sidley, who, among other things, called the information “clapprap” and “balderdash”, citing inside knowledge from a colleague in the US. He said Naidoo’s statements are the kind that grab the headlines but are based on misinformation that threatens the progress of a new industry.

Speaking in a webinar in mid-July, Naidoo said cryptocurrency regulations in South Africa were 12-18 months away. The central bank will in all likelihood treat cryptocurrencies as assets rather than a currency. It will prioritize investor protection in the regulations.

Sidley lays down the facts

In an opinion piece for the South African publication “The Daily Maverick,” Sidley pointed out that only 0.15% of cryptocurrency transactions have a criminal element, citing a report by Chainalysis. According to Sidley, Chainalysis is used by the Federal Bureau of Investigation in the United States and regulatory agencies around the world.

In contrast, Sidley noted that 5% of transactions in fiat currencies are done for criminal reasons, almost fifty times more than crypto.

He also pointed out that the public nature of blockchain transactions negates the likelihood of a criminal transaction going unnoticed. He added that money used in fiat crime is often harder to trace, drawing attention to the so-called leaked Panama Papers that exposed the financial maneuvers of several individuals and companies.

Sidley, a noted author, playwright and co-author of “Beyond Bitcoin: Decentralized Finance and the End of Banks,” also criticized the decision to regulate crypto-like financial assets. It seems, he says, as if the central bank wants to “shoe” crypto assets into archaic asset regulations drawn up for older financial instruments, such as shares, currencies and commodities.

Instead, he advocates that cryptocurrencies be defined as a new type of digital asset before regulation is considered.

Naidoo names key body to monitor AML and KYC

In July, Naidoo said the first step to cryptocurrency regulation is to declare cryptocurrencies a financial product, bringing them under the jurisdiction of the Financial Intelligence Centre, where transactions will be monitored for money laundering, tax evasion and terrorist financing.

He said it is not the Reserve Bank’s job to judge crypto’s merits, but to inform investors of its risks. He added that crypto is far too volatile to be used as a payment method.

The SARB’s regulations will see that crypto exchanges in the country comply with the Know-Your-Customer regulations.

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