South Africa to Start Tracking All Cryptocurrency Transactions in 2019
Owning bitcoin in South Africa just got a little harder, or at least it will do by the end of quarter one this year. According to a consultation paper published yesterday by the South African Reserve Bank (SARB), some hefty new regulation surrounding and exchanges and ATMs is about to be enforced.
South African Regulators Are Cracking Down on Bitcoin
The paper points to the several problems that cryptocurrencies present that spur the need to develop a proper regulatory response. Among these, it states that crypto assets may have a serious impact on the financial sector in the country. And that they present too many opportunities for “regulatory arbitrage.” Furthermore:
Crypto assets do not fit neatly within the current regulatory framework
This means, they argue, that they must draft new legislation, particularly at a time of growing interest from the public.
The paper also points to other problems with cryptocurrency, including the rising number of scams and hacks.
Currently, none of the consultation paper’s proposed approaches to regulating Bitcoin 00 have been enforced. The paper is still open to public comment until Feb 15.
The Intergovernmental FinTech Working Group (IFWG)
The IFWG formed a group to create this consultation paper. The group, called the Crypto Assets Regulatory Working Group, includes members from the SARB and the Treasury. Its aim is to forge a way forward for the regulation of cryptocurrency in South Africa.
Traditional financial institutions and the country’s Reserve bank are laying the way forward for crypto’s future here. It’s hardly surprising then, that owning bitcoin in South Africa is about to get a whole lot harder.
Within the paper, the group acknowledges the possible advantages of cryptocurrency within the South African market, such as:
Customers purchasing crypto assets could seek to diversify their investment portfolio to an asset class that is not necessarily related to specific country risk.
However, the paper weighs more heavily on the problems of leaving cryptocurrency unregulated. This is hardly surprising when you consider the members that comprise the group.
Although the potential benefits of crypto assets that are related to lower transactional costs, greater speed and enhanced security of transactions are often touted, actual use cases thus far are yet to demonstrate that crypto assets payments are consistently faster, safer and cheaper than existing options.
Moreover, they go on to reiterate the ease with which Bitcoin can assist in criminal activities such as money laundering. They would. These are bankers after all.
Bitcoin-ing in South Africa Will Get Harder by End of Q1
The paper is currently in a draft version and nothing is set in stone yet, however:
The regulatory authorities will specify the way forward through a policy instrument such as a guidance note or position paper aimed for the first quarter of 2019.
The Crypto Assets Regulatory Working Group believes that regulation should not be delayed any further and that a clear approach is necessary.
Some of the main actions that will be taken are regarding the monitoring of cryptocurrency transactions.
This will focus heavily on AML/KYC and ensure that cryptocurrency exchanges, custodial services, and Bitcoin ATMs comply with existing South African financial security legislation.
They will also need to register with the IFWG and comply with AML/CFT (combating the financing of terrorism) conditions of the Financial Intelligence Centre Act.
Moreover, service providers will need to monitor user transactions, particularly large ones that may signal terrorist activity. Any service providers that fail to comply with these requirements will have sanctions imposed upon them.
Congratulations, South Africa, you’re starting to catch up to China.
What do you think of the proposed measures to regulate Bitcoin in South Africa? Share below!
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