As it currently stands cryptocurrencies remain unregulated in South Africa, but increased interest in this field from both the consumer and enterprise space mean that could soon change.

This is the opinion of the South African Reserve Bank (SARB), which was recently represented at a PSG Think Big Webinar by deputy governor Kuben Naidoo, who discussed the matter.

As we already know, the Financial Sector Conduct Authority (FSCA) has called for guidelines to be put in place to regulate crypto in South Africa and the SARB is doing the same.

To that end he noted that the SARB now views cryptocurrencies as a type of asset and believe it should be regulated as such. He also noted that the role of the SARB as it looks to regulate the industry is not purposed towards helping users to mitigate market risks, or to pick winners and losers.

As such, the SARB should not be viewed as some sort of referee or mediator in the crypto market, with the deputy governor highlighting the fact that although it is pushing for greater regulation, significant risk still exists in this space and those that choose to invest in it, do so on their own accord.

“The ups and downs of the market fall outside the concerns of the regulatory framework in a free market, and investors are free to choose which assets to invest in,” he explained.

“The SARB is primarily concerned with implementing a regulatory framework that ensures anti-money laundering legislation and exchange controls are adhered to, just as they are for investment and trading in other financial assets,” he continued.

Along with opening up opportunities locally, the push for regulation from the SARB also stems from the increased use of crypto in illicit activities. “Another unfortunate reality is that crypto is being used by cyber criminals to demand ransoms, and to fund cross-border kidnappings and other international crimes,” he noted.

Here Naidoo says the South African Reserve Bank and Intergovernmental Fintech Working Group is actively considering taking two immediate steps to reduce the risk of cryptocurrencies being used to evade existing regulations.

The first will be to bring regulatory control of crypto in SA under the authority of the FSCA, which had its hands tied during a recent high profile case involving two brothers at a Cape Town-based exchange.

The second is a regulatory framework needs to be developed for exchanges and platforms which includes KYC (Know Your Customer) protocols, as well as exchange control and the applicable taxation laws.

Naidoo also believes cryptocurrencies should come with a “health warning”, indicating that the potential to lose money should be taken seriously.

Whether such systems can effectively be put in place, as well as how quickly it can be done, remains to be seen, but it is at least pleasing to see regulators and authorities eyeing more control measures in this space, especially as interest shows no signs of dying down.

If you are interested in hearing Naidoo’s thoughts, you can watch a replay of the live streamed webinar in the video below.

[Image – Photo by Art Rachen on Unsplash]