The South African Reserve Bank has published a consultation paper to regulate cryptocurrencies in the country. The government is looking to introduce banking-like features to the crypto sector, which doesn’t fall in line with what cryptocurrencies stand for.
The country’s apex bank has decided to address cryptocurrencies as crypto assets. It stated that this would make it easier for authorities to enforce tax policies and implement protection laws for crypto investors.
The consultation paper was published in partnership with the National Treasury, the SA Revenue Services (Sars), the Financial Sector Conduct Authority (FSCA), and the Financial Intelligence Centre (FIC). The paper recognizes the importance of cryptocurrencies as a significant fintech innovation.
Framework to eliminate fraud
The framework put in place is aimed at eliminating fraud and help protect crypto investors. It is also expected to make it easier to track crypto transactions and impose taxes on them. The Reserve bank also revealed that a policy paper on e-wallets and financial services related to cryptocurrencies would be released before the end of this quarter.
However, the framework will remove the anonymity of cryptocurrency transactions in the country. If that happens, then Bitcoin and other cryptocurrencies will operate the same way traditional banks do. The new law will ensure that exchanges and wallets will trace transactions and will be accountable for how their customers use cryptocurrencies.
The proposed regulations will make it compulsory for crypto exchanges and wallets to follow the guidelines, similar to what traditional financial institutions do. The paper cited issues such as price volatility, market illiquidity, widespread fraud, and cybercrime attacks as risks associated with the market, thus the need for tighter regulation.
The paper also revealed that cryptocurrencies function similar to financial products like securities and bonds and they will continue to be traded in the country. However, the regulatory bodies seek to improve the monitoring of cryptocurrencies and ensure that fraudulent activities are avoided.
Crypto startups to be regulated
The paper also seeks to regulate cryptocurrency startups in the country. The startups will be expected to register with relevant government authorities to conduct business. Rules and regulations will be put in place for crypto service providers in the country. The paper pointed out that “[This] could lead to formal authorization and designation as a registered/licensed provider for crypto-asset services operating in SA.”
Cryptocurrency providers will also be asked to implement strict anti-money laundering (AML) laws such as collection of information like physical addresses and national identification cards. Businesses will also be required to monitor and report suspicious transactions in cash worth 1,824 USD and above.