The South African Reserve Bank has published a consultation paper on policy proposals for cryptocurrency assets, detailing its recommended regulatory approach to Bitcoin and other tokens in South Africa.
This paper currently only offers recommendations and is open to comment from the public until 15 February 2019.
The Intergovernmental FinTech Working Group (IFWG), which includes members from Treasury and the SARB, formed a Crypto Assets Regulatory Working Group to construct recommendations for the regulation of digital assets in South Africa.
This consultation paper is a product of this working group, and addresses the possible advantages and disadvantages of cryptocurrency in a South African context – including its ability to be used for criminal activities and its impact on financial services.
“Upon conclusion of the consultation phase, the regulatory authorities will specify the way forward through a policy instrument such as a guidance note or position paper aimed for first quarter of 2019,” the paper stated.
“The IFWG and Crypto Assets Regulatory Working Group is of the view that regulatory action should not be delayed until the most appropriate regulatory approach has become clear, but to rather act and amend as innovation evolves.”
The regulations proposed in the paper aim to help monitor the purchasing and selling of cryptocurrency, with a major focus on improving compliance with existing financial security legislation.
Under these new rules, all cryptocurrency asset trading platforms, custodial service providers, and payment service providers will be required to register with the IFWG and comply with AML/CFT provisions of the Financial Intelligence Centre Act.
These platforms include Bitcoin exchanges, trading centres, and cryptocurrency ATMs.
Additionally, the government recommends that cryptocurrency service providers monitor user transactions – especially large transactions which may be linked to terrorist activity.
Regulatory authorities did add that they would not impose any market entry conditions for registered entities.
Where companies and service providers do not comply with these requirements, the government recommended that administrative sanctions be imposed.
The Crypto Assets Regulatory Working Group said it would continue monitoring the state of the cryptocurrency market, especially businesses and users situated in South Africa.