The South African Reserve Bank (SARB) released a consultation paper on Wednesday, January 16 detailing proposed regulations for companies offering crypto-related goods and services within its territory.
It marks the first major step taken by South African authorities to regulate the crypto industry, with the central bank finally realizing that citizens “are left vulnerable” if those who sell crypto assets are not monitored.
With this in mind, most of the regulatory approach proposed by SARB centers on cryptocurrency exchanges and wallet providers of different kinds including but not limited to custodial wallets and crypto payment service providers.
The 32-page proposal defined cryptocurrencies as well the forms of service rendered by companies operating within the industry. It also acknowledged that cryptocurrencies do not neatly fit into the existing regulatory framework for traditional finance companies.
Major Highlights Of Proposed Rules For South African Crypto Companies
1.SARB recommends that crypto assets should not be given legal status or recognized as electronic money.
2. The central bank proposed that South Africa works towards the development of a full regulatory framework for the crypto industry. The banking authority believes that this can be achieved in three phases :
Defining a registration process for crypto-asset service providers
Review of the existing regulatory framework to find out what could apply to cryptocurrencies. Then amending the regulations to suit the space or create entirely new laws.
Assessment of implemented regulations
3. SARB is expected to release a registration process for crypto-asset service providers before the end of Q1 2019 which will potentially lead to the licensing of such firms.
4. South Africa will create new laws for the crypto industry if existing financial laws do not apply. Insights for a new regulatory framework be drawn from current AML/CFT rules.
5. SARB proposes that crypto exchanges, crypto wallet providers, crypto custodians, crypto payment services providers and companies accepting cryptocurrencies will register at a central point.
6. The businesses mentioned above will register with the South Africa Financial Intelligence Center (FIC), carry out effective know-your-customer procedures and report suspicious transactions including any that is above R20000 ($1450).
7. Administrative sanctions will be imposed on companies that do not meet up with the FIC’s requirements.
8. A Crypto Asset Regulatory Working Group including officials from SARB, FIC, National Treasury (NA) and Financial Sector Conduct Authority (FSCA) will keep monitoring the industry to adjust the regulatory framework when there is a need.
9. Rather than a continuous delay, the proposal recommends that South Africa moves quickly to get a grip on the industry and then “amend as innovation evolves.”
The consultation paper released by the South Africa Reserve Bank is open for public comments until February 15, 2019. If the nation agrees on the proposed rules, then South Africa would become the first nation in the region to release regulations for the crypto industry.
See our earlier article on the State Of Crypto Regulation in Africa.