The Reserve Bank has published a consultation paper on proposed new South African cryptocurrency rules. In the paper, the Reserve Bank details its plans on recommended rules and regulations surrounding cryptocurrency in South Africa.
The proposed South African cryptocurrency rules were released together with the Financial Intelligence Centre (FIC), Financial Sector Conduct Authority (FSCA), National Treasury (NT) and South African Revenue Service (SARS).
Initially, the Reserve Bank issued a statement in 2014 warning South Africans against the use of cryptocurrency. This initial statement cautioned members of the public to take extreme measures of precaution when dealing with cryptocurrency. The reason for this warning was that, at the time, there were no South African cryptocurrency rules. This meant that there was no legal protection or recourse surrounding these transactions and investments. As a response to the increasing use of cryptocurrency in South Africa, an Intergovernmental Fintech Working Group was formed at the beginning of 2018 to investigate further, report back, and formulate a response based on the outcome of the investigation. The Group aims to:
[De]velop a common understanding among regulators and policymakers of fintech developments, as well as policy and regulatory implications for the financial sector and economy. The approach to reviewing fintech innovation is a balanced one, considering both its benefits as well as taking cognisance of associated risks.
The proposed South African cryptocurrency rules cover important issues like:
- Defining what cryptocurrency is;
- The risks and benefits associated with using this form of currency;
- Regulating the buying and selling of cryptocurrency;
- Developing South African rules regarding the use of cryptocurrency; and
- Proposals and conclusions.
Some of the major points to take away from these proposed South African cryptocurrency rules are that they aim to achieve compliance with existing financial laws and aim to create new, very strict rules, too. One of the stricter initial proposals from the consultation paper is that cryptocurrency service providers (like Bitcoin) register as financial service providers in South Africa. This could become extremely difficult to enforce, as most of the cryptocurrency service providers are run on a global level, and it would be difficult to force such an entity to comply with the country’s internal rules, regulations, and laws. Furthermore, sanctions are proposed for non-compliance with the new rules. However, the same issue arises – how will global cryptocurrency service providers (like Bitcoin) be held to these South African rules?
The proposed rules and regulations are open for public comments until 15 February 2019. You can submit your comments and input on the proposed South African cryptocurrency rules via email to SARBFINTECH@resbank.co.za.
Do you think this consultation paper is an appropriate response by the Reserve Bank to regulate cryptocurrency in South Africa?