The South African government is in the process of compiling a consultation document that is aimed at a regulatory approach to cryptos. The document is currently open to comment from the public.
South African government in discussion about cryptos
Basically, the consultation document discusses the advantages and disadvantages of the use of cryptocurrencies in the South African economy.
It is noted in the document that the current financial system is regulated and thus safe for South Africans to use. However, since cryptocurrencies are not regulated as of yet, it poses security risks.
Furthermore, it is proposed that cryptocurrencies should not be recognized as electronic money. Instead, an appropriate regulatory framework should be developed by which crypto-asset service providers can register. This entails a detailed review of the current regulatory frameworks so that they can be amended or updated.
The result could be an amendment to registration requirements. As well as the formal designation of a registered or licensed crypto asset service provider in South Africa.
It is also noted in the consultation document that at the moment, cryptocurrencies may not be safe due to various cases of tax evasion and other criminal activities. This may have a negative impact on South African financial services.
The consultation document was compiled by the South African National Treasury. Click here to view the consultation document.
Current legislation in South Africa
It is important to note that currently there isn’t any regulation relevant to cryptocurrencies in South Africa. Back in 2014, National Treasury issued a warning to investors regarding the risks of investing in cryptocurrencies. They said the industry is not regulated and no legal protection exists.
In return, the South African Reserve Bank by means of the National Payment System Department published a paper in the same year. In this document called the position paper on crypto assets, it is said that some of the risks associated with the industry relate to money laundering and funding of terrorist activities.
It has always been the case that consumers and merchants carry the risks associated with cryptocurrencies should they conduct business with cryptos.
What will this mean for the SA crypto community?
CEO of Bitmart, Jacques Serfontein says regulating the crypto industry in South Africa is a good thing. He says the government is working towards improving crypto’s compliance with existing financial security legislation.
“It can put an end to fly by night companies who trick investors into giving them their valuable Bitcoin. They promise unrealistic high returns that will never happen. Millions have been stolen by these tricksters,” said Serfontein.
Should these new rules by implied, cryptocurrency asset trading platforms, service providers and payment service providers will be required to comply with the South African Financial Intelligence Centre Act and the IFWG.
Be sure to check out the consultation document and comment before the deadline of 15 February 2019.