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SA Reserve Bank will regulate cryptocurrencies as financial assets

13-Jul-2022 By: Rohit Tripathi
SA Reserve Bank will

South Africa’s Reserve Bank will shortly regulate

 cryptocurrencies as financial assets: Report

In order to strike a balance between investor protection and innovation, the South African Reserve Bank plans to implement legislation that will classify and regulate cryptocurrencies as financial assets next year.

According to data from a global exchange, there is a solid market for cryptocurrencies in South Africa, where about 13% of the population is thought to be cryptocurrency owners.  Since more than 6 million people in the nation are exposed to cryptocurrencies, regulation of the industry has long been a topic of discussion.

Currently, companies or individuals seeking to offer guidance or intermediate services concerning cryptocurrency must be accredited as financial services providers. This entails completing a number of checkboxes to adhere to international standards established by the Financial Action Task Force.

The proposal to classify cryptocurrencies as financial products was formally proposed in February 2022 by South Africa's National Treasury budget review. Additionally, the state intends to improve the tracking and reporting of cryptocurrency transactions in order to adhere to national exchange laws.

Kuben Chetty, the deputy governor of the South African Reserve Bank, stated on July 12 in an online series sponsored by a regional investment firm that new legislation will be implemented in the coming year. Because of this, cryptocurrencies will be covered by the Financial Intelligence Centre Act (FICA).

This is important because it will enable the industry to be monitored for money laundering, tax evasion, and financing of terrorism, which has been a highly contested outcome of the decentralised structure of cryptocurrencies and blockchains.

Chetty outlined the steps that the SARB will take over the next twelve months to establish this new regulatory framework. The first step is to declare cryptocurrencies to be financial products, allowing for their placement on a schedule under the Financial Intelligence Centre Act.

After that, an exchange regulatory framework will be created, which would contain specific KYC criteria as well as the need to abide by tax and exchange control rules. Additionally, exchanges will be required to publish a "health warning" to underline the possibility of financial loss.

Chetty remarked that over the past decade, the SARB's viewpoint on the industry has drastically evolved. Five years ago, the institution believed there was no need for any regulatory control, but this opinion has since altered as the definition of cryptocurrencies as financial assets has changed that stance.

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