South Africa’s Intergovernmental Fintech Working Group (IFWG) has a released new position paper that calls for the regulation of the country’s cryptocurrency ecosystem. In the document, the IFWG, which is a creation of the South Africa Reserve Bank (SARB), recommends “a staged approach to bring crypto-assets within the regulatory remit through the regulation of crypto asset service providers (CASPs).”
Crypto Service Providers to Adhere to AML/CFT Requirements
The 49-page document also “sets out 25 recommendations for a revised South African policy, legal and regulatory position on crypto assets and related activities.” According to the IFWG, some of these recommendations “are already underway and in the process of being implemented while some will take much longer to implement.”
Meanwhile, in the position paper, the IFWG’s recommendations are grouped into three overarching categories. Concerning the first one, the working group recommends CASP adherence to the legislative requirements that are aimed at anti-money laundering and combating the financing of terrorism (AML/CFT). Some of these requirements include the reporting of “cash transactions of $1818.00 (R25 000.00) and above or the applicable threshold at any given time.”
Central Bank Arm to Monitor Cross-Border Crypto Transactions
In the second category, the IFWG says it wants the Financial Surveillance Department (Finsurv) of the SARB “to assume the supervisory and regulatory responsibility for the monitoring of cross-border financial flows in respect of crypto assets and CASPs.” In addition, the working group is recommending the amendment of certain parts of the exchange control regulations to enable the placement of crypto asset trading platforms (CATPs) under the purview of relevant bodies. The position paper states:
It is further recommended that a new dispensation should be created under the exchange control framework to allow CATPs (licensed as above) to source or buy crypto assets offshore for the purpose of selling to the local market, subject to specified limits to be determined by Finsurv.
In the third category, the IFWG recommends that crypto-assets be declared financial products. Such a declaration would require CASPs “to become licenced intermediaries and provide for the rendering of advice by such entities.” This, in turn, allows for “regulatory oversight and will assist in addressing the immediate exploitation of consumers by unscrupulous entities.”
IFWG Not Endorsing Crypto Assets
In the meantime, the IFWG has insisted that its release of the new position paper “should not be interpreted as any type of endorsement of crypto assets.” Instead, the working group argues that this decision “to formally bring CASPs within the domestic regulatory remit was driven by a combination of factors.”
One of these factors pertains to the need “to promote responsible innovation and regulate the conduct of these providers.” The high inherent risks associated with crypto assets as well as scam activity are the other factors that prompted IFWG’s recommendations.
Finally, the IFWG is urging crypto-asset consumers to ensure they fully understand the products and services they are gaining exposure to, as well as the associated risks.
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