The deputy governor of the South African Reserve Bank (SARB) has announced that cryptocurrency trading would be regulated in South Africa during the next 12 to 18 months, beginning on July 12, 2022.
SARB investigations have shown non-compliance with cryptocurrency legislation, resulting in tax evasion, money laundering, and terrorist funding which is caused by decentralized cryptocurrencies.
SARB won’t regulate cryptocurrencies as a currency but as an asset. Cryptocurrency regulation will legitimise the business and assure compliance with anti-money laundering and exchange control laws.
Anticipated regulatory framework
Cryptocurrency legislation will be gradual. SARB will classify cryptocurrencies as financial products under the 2002 Financial Advisory and Intermediary Services Act (FAIS).
This will give the Financial Sector Conduct Authority authority over the cryptocurrency market. Once bitcoin is considered a financial product, crypto-asset platforms, brokers, and advisers will need FAIS authorisation.
Crypto-asset service providers will be responsible institutions under the 2001 Financial Intelligence Centre Act. Crypto-asset service providers must register with the Financial Intelligence Centre(FIC).
Crypto-asset services are expected to be licenced under the CFI Act (COFI). The distribution of crypto-assets may be considered an alternative investment fund under COFI. The Financial Sector Regulation Act, 2017 will incorporate crypto-asset services as a financial service to fit with the Twin Peaks Model.
The SARB wants to regulate crypto exchanges to allow crypto listings. The regulatory framework’s implementation is uncertain. SARB has indicated that it would demand know-your-customer procedures and, when relevant, suspicious transaction reports to the FIC.
Investors may trade cryptocurrencies locally with the proper permission. Cross-border cryptocurrency trading and investments are allowed if exchange control regulations are followed and every transaction is reported to the SARB.
Investors and suppliers of cryptocurrencies and associated services should be aware of the prospective regularization and regulation of the industry.