South Africa to revise its stance on crypto amid surging retail interest
- This new stance is inspired by the rapid growth of South Africa’s crypto market.
- The South African crypto market surpassed £104.71 million earlier this year.
- Through this change, South Africa’s FSCA will be tasked with preventing crypto-related fraud.
South Africa’s financial watchdogs are gearing up to introduce a crypto regulation framework in the country. A report unveiled this news on June 14, citing a position paper published by the South African Intergovernmental FinTech Working Group (IFWG) via the Crypto Assets Regulatory Working Group (CAR WG). IFWG outlined a regulatory framework that focuses on crypto asset service providers (CASPs) through this publication.
According to the position paper, IFWG is looking into crypto regulations in a phased and structured way. Before taking this stance, South Africa’s approach towards crypto has been cautious but unintrusive since 2014. Although the country is now turning to regulate crypto, IFWG warned that cryptocurrencies are still risky and volatile. To this end, the entity suggested that consumers should be wary of investing in cryptocurrencies, seeing as they could easily incur financial losses.
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Allegedly, this policy change comes after observers found multiple factors that rendered the previous approach inefficient. One of these factors is the rapid growth of the South African crypto market, which hit $147 million (£104.71 million) earlier this year.
25 recommendations on crypto regulation
IFWG also published a press release in which it made 25 recommendations on how to rein in the crypto sector. The recommendations focus on three primary areas of concern. These are Anti-money laundering and combating terrorism financing (AML/CFT), cross-border financial flows, and the application of financial sector laws. By concentrating on these facets, IFWG seeks to task South Africa’s Financial Sector Conduct Authority (FSCA) with preventing crypto fraud and punishing wrongdoers.
Per IFWG, six comprehensive principles will steer South Africa’s approach towards implementing effective crypto regulations. The first one is ensuring the proper regulation of cryptocurrencies, followed by maintaining an activities-based point of view to ensure regulators are led by a principle of the same activity, same risk, same regulations. The third principle is applying proportionate regulations that go hand in hand with the risks posed, and maintaining a collaborative spirit on crypto regulation.
The last two principles are proactively monitoring the crypto sector and fostering digital literacy among customers. In the press release, IFWG also cautioned that the decision to amend South Africa’s stance on crypto is not an endorsement of the nascent sector.
This news comes after a report unveiled South African authorities are investigating a crypto-related scheme that defrauded investors out of $80 million.