South Africa has laid the foundation for finance watchdogs to set crypto-asset controls as the nation seeks to curb growing cases of fraud and improve the management of cross-border flows.
As digital currencies move from the periphery of the finance world to the mainstream, crypto-assets service providers have come under increased scrutiny worldwide. In South Africa, the collapse of a bitcoin trader late last year, alleged to be the country’s largest Ponzi scheme, and other cases of market abuse have highlighted the need for tighter rules, according to a statement by the Intergovernmental Fintech Working Group on Friday.
“Crypto assets will be brought into the South African regulatory purview in a phased and structured manner,” it said. “It is, however, reiterated that with or without regulation, crypto assets remain inherently risky and volatile.”
A position paper by the grouping makes 25 recommendations and outlines a collaborative and activities-based 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.
In January, the daily value of crypto-asset trading exceeded R2-billion for the first time in South Africa suggesting significant appetite in a market that was largely going unchecked by regulatory powers.
Central bank digital currency
The South African Reserve Bank said last month it is currently probing the feasibility, desirability and appropriateness of a central bank digital currency as electronic legal tender for general-purpose retail use.
The backing of the working group’s position paper will present the country’s regulators, including the Financial Sector Conduct Authority, with the required tools to begin implementing measures linked to its recommendations, it said.
“The dynamic development of the crypto market must continue to be proactively monitored, including maintaining knowledge on emerging international best practices through standards-setting bodies” and other measures, IFWG said. — Reported by Roxanne Henderson, (c) 2021 Bloomberg LP