South Africa’s financial regulator announced its intention to bring the cryptocurrency market under its oversight. This was mentioned in a paper from the Intergovernmental Fintech Working Group (IFWG) yesterday with support from the Financial Sector Conduct Authority (FSCA). The paper explained that the country, home to 59 million people, will start to regulate crypto assets “in a phased and structured approach.”
The IFWG position paper made 25 recommendations and outlined what they think is the best approach for the creation of a regulatory framework. It also highlights the need for better financial literacy for consumers as the retail interest in digital currency grows.
The IFWG paper also highlighted that the recent Ponzi scheme of a Bitcoin trader late last year and other cases of market abuse has brought about the need for tighter rules around the cryptocurrency market in the country. The IFWG stated, “Crypto assets will be brought into the South African regulatory purview in a phased and structured manner. It is, however, reiterated that with or without regulation, crypto assets remain inherently risky and volatile.”
The paper done by the IFWG is expected to guide regulators and provide them with the required tools to begin implementation as recommended in the paper. The IFWG stated, “The dynamic development of the crypto market must continue to be pro-actively monitored, including maintaining knowledge on emerging international best practices through standard-setting bodies.”
South Africa is also amongst the countries looking into the possibility of a Central Bank Digital Currency (CBDC). The South African Reserve Bank mentioned last month that it is currently looking into creating its own CBDC as an electronic legal tender for general-purpose retail use.
What this means
As mentioned, South Africa intends to set cryptocurrency controls in a bid to reduce and ultimately eradicate the growing cases of fraud and improve the management of cross-border flows. The IFWG recommended imposing anti-money laundering rules on crypto asset service providers, monitoring cross-border financial flows and applying financial-sector laws to the crypto industry.
The need for this control is now important as there is increasing interest in cryptocurrency from the people of South Africa. In January, South Africa saw an increase in the daily value of cryptocurrency-related transactions to about 2 billion rand ($147 million).
Sean Sanders, CEO of Cape Town-based exchange Revix, bemoaned the slow rate of forming regulations in the country, saying it has stymied growth because customers “arrive at our platform with scepticism.”
Bitcoin is currently trading at $35,460, down 3.85% for the day. The cryptocurrency market capitalization is also struggling to maintain the $1.50 trillion capitalization mark as the market is set to close the week bearish.