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Strong retail interest in cryptocurrencies has led South African regulators to reconsider their view of cryptocurrencies.
Financial regulators in South Africa are laying the foundations for “phased and structured” cryptocurrency regulation. This step represents a reversal of the largely practical approach taken over the last seven years, due to the growing interest of retailers in cryptocurrencies in the country.
In positional document published on June 11, the Intergovernmental Fintech Working Group (IFWG), under the auspices of the Cryptocurrency Regulatory Working Group, established a plan to establish a regulatory framework that will focus on cryptocurrency service providers, or CASP.
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Current crypto policy
South Africa’s initial national policy has so far been cautious towards the crypt, but it has also not intervened. In 2014, the National Ministry of Finance issued a public statement dedicated to this issue. Citizens were warned that they could trade cryptocurrencies, but only at their own risk. This means that they would not be offered any legal protection or sanctions in the event of difficulties.
Commentators noted that several factors, including an increase in the South African cryptotrk to more than 2 billion rand ($ 147 million) in the daily value traded earlier this year, have made this earlier policy unsustainable.
The new IFWG emphasizes that although a structured regulatory framework is to be put in place, crypto assets remain “inherently risky and volatile” and potential financial losses remain high.
Functioning of regulation
Six overarching principles will inform about the country’s evolving approach. These are: to take an “action-based perspective” to ensure that the principle of “same action, same risk” guides regulators’ decisions; implementation of risk-proportionate measures; taking a common approach to the regulation of cryptocurrencies; keep up with international best practices and promote digital financial literacy among consumers.
The paper also presents 25 recommendations on how to regulate cryptocurrencies in relation to three main areas of interest: money laundering and the fight against terrorist financing, cross-border financial laws and the application of financial sector laws. The latter means that the South African Financial Sector Authority will be tasked with preventing market abuse.
Press Release
Together with the published document, it was published by the IFGW press release describing a strategy that gave rise to concerns about the nature of the asset class and the surrounding ecosystem. The IFGW pointed to decentralization as a disadvantage, not as a plus, which leaves consumers and traders without using an authority or a centralized body that could resolve user errors. For example, it will help with an incorrectly entered crypto wallet address.
Conclusion
IFGW remains concerned about the manipulative nature of certain assets, volatility and fraudulent activities such as the Ponzi scheme. Nevertheless, they are open to the crypt, and try to find a way to help set the best business conditions while providing legal protection for all.
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