South African cryptocurrency exchange Luno has outlined its expectations for the regulation of cryptocurrency locally.
Speaking in an interview with MyBroadband at a media event in Sandton, Johannesburg, Luno South Africa country manager Marius Reitz said that he does not expect the government to inhibit the pace of innovation with its regulation.
He said he imagines the cryptocurrency regulation which will be implemented in South Africa will not be too intrusive.
“I think the regulation will be relatively open,” Reitz said. “I don’t see regulators trying to stifle innovation.”
“I think they will focus on the consumer protection side, making it mandatory for exchanges to register as reporting entities, meaning they will have to report suspicious transactions to regulators.”
He could not be sure the direction the government would take when defining regulation, but described these measures as “low-hanging fruit” for regulators.
Additionally, Reitz expects that regulation will require exchanges to implement Know Your Customer (KYC) and Anti Money Laundering (AML) systems in order to operate legally.
He expects that exchanges will have to register with the Financial Intelligence Centre, too, and there may be minimum requirements surrounding the storage of user funds.
Earlier this year, the Intergovernmental Fintech Working Group (IFWG) released a report on the results of its engagement with South African regulators.
This report raised concerns around the risk of criminal activity being enabled by cryptocurrencies, with the currencies being used as instruments for illegal practices.
Regulators stated that the inability to control these transfers or make them subject to know-your-customer requirements was concerning.
Speaking to regulators at this event, Luno said that regulation was necessary to allow for improved security standards.
The report found that AML and other security regulations would be necessary to prevent the use of cryptocurrency as a criminal instrument.
A study commissioned by Luno which investigated South African sentiment towards cryptocurrencies found that regulation played a significant role in adoption.
18% of respondents in the survey stated that the official position of the government and financial institutions are a great factor which could influence their adoption of the technology.
Luno notes that while cryptocurrency is not currently regulated in South Africa, this does not make it illegal.
As a self-regulating entity, Luno complies with KYC and AML processes despite not being obligated to do so.
“While cryptocurrency companies are not required by law to do so, credible industry players do self-regulate, which means behaving as if they were fully regulated.”