The South African Reserve Bank intends to introduce regulations next year according to which cryptocurrencies will be classified as financial assets. This regulation is necessary to protect investors and attract funds to innovative technologies.
According to a study conducted by the Luno exchange, 13% of the population of South Africa own digital assets. For this reason, the regulation of cryptocurrencies has become important.
Companies or individuals wishing to provide services in the field of cryptocurrencies become financial service providers. They must comply with a number of requirements in accordance with the global guidelines set out by the Financial Action Task Force.
According to a review of South Africa’s National Treasury budget published in February 2022, cryptocurrencies are financial products. The state plans to strengthen monitoring and control of transactions related to cryptocurrencies in accordance with the requirements of the regulator.
South African Reserve Bank deputy governor Kuben Chetty has confirmed that the new legislation will be introduced within 12 months. This will lead to cryptocurrencies falling under the Financial Intelligence Centre Act (FICA).
The new rules will allow digital assets to be monitored for money laundering, tax evasion and terrorist financing.
The introduction of new rules will become a starting step for the development of a regulatory framework that will include the requirements of “Know Your Customer” (KYC), as well as making the necessary changes to the laws on tax and currency control.
As the adoption of cryptocurrencies has grown, the Reserve Bank’s attitude towards digital assets has changed significantly over the past decade. About five years ago, the institution believed that there was no need for any regulatory oversight, but the rapidly growing number of people using cryptocurrencies has changed this position of the regulator.
The South African Reserve Bank is also continuing to explore the possibility of introducing a central bank digital currency (CBDC), having recently completed a technical proof-of-concept in April 2022.