The major exchanges in South Africa have welcomed the central bank’s intentions to regulate cryptocurrencies as financial assets.
In the next 18 months, South Africa’s Reserve Bank will begin regulating cryptocurrencies as financial assets, a step that exchanges anticipate will increase the country’s cryptocurrency adoption.
The South African Reserve Bank has been discussing for some time the classification of cryptocurrencies as financial assets rather than currency (SARB). In an online conversation on July 11, Deputy Governor Kuben Chetty indicated that the new regulations would take effect within the next year.
The cryptocurrency market in South Africa has been allowed to flourish organically, with no clear restrictions established by the SARB until recently. More than 6 million South Africans are expected to own some cryptocurrency, making the country a leader in cryptocurrency adoption.
Now that the SARB has officially taken a position on the ecosystem, exchanges, traders, and investors can assess the repercussions.
Marius Reitz, general manager for Africa at the global cryptocurrency exchange Luno, has advocated for the establishment of lucid regulatory criteria within the cryptocurrency business. In conversation to Reitz lauded the regulatory measure and opined that it will make the country’s cryptocurrency users safer.
“Crypto asset service providers (CASPs) will be required to obtain FSP licences, and it will be easier for the public to recognise a trusted and licenced platform. It would create an entry barrier for platforms that disregard the security of consumer dollars and customer data.”
Reitz stated that Luno was in a privileged position to anticipate regulatory changes in South Africa, given that the company operates in a number of foreign locations that already have stringent regulatory rules, such as Malaysia and Singapore.
In addition to country-specific peculiarities, Luno’s Africa-based general manager stated that compliance with new regulatory limits would not necessitate a step-change in the company’s procedures. Luno already conducts Know Your Customer (KYC) checks, sanctions screens, and anti-money laundering (AML) and counter-terrorism financing (CTF) procedures.
Reitz also recommended that additional exchanges may utilise reserves verification. Although not mandated by law, Luno conducted an audit of its crypto holdings to validate custody of customer assets and increase customer confidence.
VALR, another South African cryptocurrency exchange that has rapidly become a trusted platform for local crypto traders and customers, is also operating normally. CEO Farzam Ehsani told that the organisation is already acting as a regulated firm by implementing KYC checks and a risk management and compliance programme.
In addition to having AML and CTF rules in place, VALR has collaborated with authorities to combat the illegal transfer of funds. Ehsani was sure that adopting legislation for the space would not result in restrictive constraints, given that the Financial Intelligence Centre would soon oversee the industry:
“VALR is already registered with the Financial Intelligence Centre, and we have been working with the FIC for many years, so any official regulatory framework will only codify what is already in place.”
Through Project Khokha, the SARB continues to investigate the potential deployment of a central bank digital currency (CBDC). A number of important participants from South Africa’s traditional banking sector have actively participated in testing a proof-of-concept for the proposed CBDC settlement system.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.