Tuesday, January 31, 2023
  • The South African Reserve Bank will have regulations for cryptocurrency by the end of 2023
  • South Africa surged past Kenya to take the top spot in terms of proportional cryptocurrency ownership by citizens
  • The regulation will also cover rules governing exchanges and possibly promoters of cryptocurrencies as well

The South African Reserve Bank will have regulation for cryptocurrency by the end of 2023. This is according to the Deputy Governor of the South African Reserve Bank, Kuben Naidoo. Naidoo spoke during a webinar titled “The future of Money, Banking and Crypto” organised by PSG Konsult, a financial services firm.

The webinar was held in June and discussed, among other things, the progress South Africa is making with initiatives in digital currency. Interestingly, South Africa surged past Kenya to take the top spot in terms of proportional cryptocurrency ownership by citizens.

  • SARB working on regulation for cryptocurrencies
  • Regulation to cover exchanges, cryptocurrencies and promoters
  • SARB wants to make cryptocurrency safer for South Africans

More progressive than most

South Africa’s stance on cryptocurrency has been more progressive than most. Whilst the country had no legislation or rules against cryptocurrency ownership and trading, it lacked definitive guidance on where it stood. The country’s tax authority, South African Revenue Services (SARS), made gains on cryptocurrency taxable through normal income tax channels, requiring citizens to declare cryptocurrency holdings.

Other than that, the nation has very much remained neutral. The country has been working on a Central Bank Digital Currency with “Project Khoka” in the pilot phase. The country also hosts “Project Dunbar”, which tested and proved that cross-border payments with central bank digital currencies were possible.

According to data obtained from Triple-A, South Africa ranks highest in terms of proportional cryptocurrency ownership by citizens, with 12.45% as of July 2022.

Read: South Africa dethrones Kenya in cryptocurrency ownership

Cryptocurrency regulation in South Africa by the end of 2023

As previously stated, Naidoo expressed the view of the SARB that cryptocurrencies are financial assets and not just currencies. This is one of the areas that regulation is expected to address. Defining them as instruments paves the way for listing cryptocurrencies in South Africa.

The regulation will also cover rules governing exchanges and possibly promoters of cryptocurrencies as well. Naidoo believes the regulation will likely be released in the next 18 months (by the end of 2023). He clarified that their concerns are with making cryptocurrency safer for citizens; the market’s direction isn’t the concern.

Currencies can go up or down, but the important thing is to have safe environments for citizens to access digital currencies. Consumers need education on risks and regulations on exchanges, and promoters will aid in this.

SARB positive on cryptocurrency

Speaking during the webinar, Naidoo also noted that some cryptocurrencies introduce genuine technological advancements that can improve sectors like payment and finance. The planned framework will need to adhere to anti-money-laundering and exchange controls.

Matters like KYC will also have to be taken into account. Naidoo favours a system that will explicitly include digital currencies in a schedule in the country’s Financial Intelligence Centre Act and compels cryptocurrencies to carry clear warnings that money is at risk of loss for the public.

Not late to the cryptocurrency party

Naidoo brushed aside concerns of being slow to act on cryptocurrency by saying they have taken the same approach as much of the world in studying and understanding the terrain first. The highest cryptocurrency ownership rate in Africa seems to support his argument.

The race for cryptocurrency regulation in Africa is moving slowly. Although the Central African Republic has adopted Bitcoin as legal tender while Nigeria launched the eNaira, progress on the regulation front has been slow.

Morocco looks likely to be the first African country to release comprehensive regulation. The G20 has made it clear that better regulation of cryptocurrency is needed, and we expect to have comprehensive rules for member states by the end of 2022.

Read: How the Federal Reserve affects the entire cryptocurrency market

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