After years of taking a soft stance that it would not regulate the crypto industry, the Central Bank of South Africa has changed their mind by working to establish a regulatory framework to govern digital asset transactions.
In a webinar titled: ‘The future of money, banking and crypto’, organized by financial services firm PSG Konsult Ltd, Naidoo said: “Our view has changed and we now regard it [cryptocurrency] as a financial asset and we hope to regulate it as a financial asset. There has been a lot of money that has flowed in, and there is a need to regulate it and bring it into the mainstream.”
The Deputy Governor stated that the regulatory framework for the use of cryptocurrencies will perform a crucial role in ensuring investor protection and confidence and creating a safer crypto ecosystem in South Africa.
“The use of crypto for money-laundering and other illicit activities is a source of concern. 90% of transactions involving crypto-currency in the US are for the purchase of opioids or gambling tokens,” Naidoo highlighted.
The executive mentioned that while regulations could take 12 to 18 months to see their implementations, some know-your-customer (KYC) rules and licenses for exchanges will be enforced much earlier. He said the Central Bank is close to finalizing the exchange control rules and requirements.
Naidoo also disclosed possible plans by the Central Bank to issue a national Central Bank Digital Currency (CBDC). He stated that the regulator is currently conducting research and experiment on a CBCD project.
Digital Road Ahead
South Africa is one of the top 10 countries for cryptocurrency adoption in Africa, according to a recent report by Chainalysis, a blockchain data platform.
The crypto regulatory landscape in the country is still in a state of uncertainty. Although regulators like the Central Bank and the Financial Services Conduct Authority (FSCA) are yet to implement any regulations, the sentiments of these agencies towards crypto regulations have evolved.
Some regulatory framework is now expected not so far in the future. Such movements have been triggered by the rising concern of customer protection in the wake of the country’s $4 billion in cryptocurrency scams.
Regulation in the crypto industry is essential to ensure the new technology goes mainstream and lays the foundation to develop key relationships, such as with banking institutions.
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