The Intergovernmental Fintech Working Group (IFWG) recently released a position paper [PDF] on crypto assets, outlining a framework for how the government would regulate the assets in South Africa in the future.
In 2014, the National Treasury published its first statement on crypto assets as a joint initiative together warning users about the risks associated with using crypto assets for transacting or investing, and recommended they exercise prudence in this respect.
Crypto investors had no legal protection or recourse at the time because there was no stated legislation regulating the usage of crypto assets. As a result of cryptocurrency scams, thousands of South African investors have lost money.
The IFWG stated in the paper:
“It is, however, reiterated that, with or without regulation, crypto-assets remain inherently risky and volatile, and consumers’ chances of incurring financial losses through investing in crypto assets remain high.”
In January, daily crypto-asset trading values in South Africa surpassed R2 billion, or $72,557,730.00, indicating that significant value may be moving into crypto assets without oversight from the SARB’s Financial Surveillance Department.
Thus, the IFWG’s position paper presents 25 recommendations on incorporating crypto assets into South African regulatory frameworks to drive market behavior suitable for the country.
Furthermore, the IFWG emphasized that the decision to regulate crypto assets does not imply the government’s, regulators, or individual IFWG members’ support for crypto assets but rather to promote “responsible innovation.”
Consumers need safeguarding
The IFWG’s decision to put crypto-assets under domestic regulatory jurisdiction stems from several market events, including growing retail interest and the need to safeguard consumers, who have no recourse to any authority, as there is no central intermediary issuer or ledger-keeper.
As the crypto-asset ecosystem grows, new developments will continue to question the applicability of existing rules and regulations in South Africa.
Without domestic regulation, the increasing complexity for authorities to keep an eye on crypto asset-related activity and the corresponding mandatory reporting and information requirements will be an issue.