Regulatory clock ticks for cryptocurrency assets in SA

‘Defining this as a financial product and then developing the regulatory framework is important.’
Image: Bloomberg Creative Photos/Bloomberg

South Africa is moving with more urgency to stiffen oversight of cryptocurrency assets after a proliferation of scams.

A new regulatory timeline foresees finalising a framework in three to six months, after the publication of proposals earlier in June that requires public comment before approval, according to Kuben Naidoo, chief executive officer of South Africa’s banking regulator known as the Prudential Authority.

“We are trying to put in place the regulatory framework quickly,” said Naidoo, who’s also a deputy governor of the South African central bank. “Defining this as a financial product and then developing the regulatory framework is important.”

The approach that’s taking shape means tougher rules could be imminent this year after a jolt of scandals that most recently included a suspected Ponzi scheme, which resulted in the disappearance of an estimated $3.6 billion in Bitcoin.

South African cryptocurrency service providers have been operating unchecked by regulatory powers even as the popularity of the asset class has taken off. Last year, the collapse of Johannesburg-based Mirror Trading International was called the biggest crypto-related scam of 2020 by blockchain data platform Chainalysis.

“We are of the view that cryptocurrencies are risky and we want to ensure that the financial sector is aware of those risks and pricing for those risks properly,” Naidoo said. “We think it’s a market-conduct matter. It’s an investor-protection matter.”

Africa’s most developed economy is tightening the screws on the industry as digital currencies move from the periphery of the finance world to the mainstream and face deeper scrutiny worldwide.

In one of the most significant moves to date by a regulator amid a global crackdown, Binance Markets Ltd. was banned Sunday by the UK financial watchdog from doing any regulated business in the country. Huobi, one of the most popular cryptocurrency platforms in China, said Monday that users in the country are prohibited from trading derivatives.

Under global regulators’ plans to ward off threats to financial stability from the volatile market, banks will face the toughest capital requirements for holdings in Bitcoin. Earlier this month, the Basel Committee on Banking Supervision proposed that a 1 250% risk weight be applied to a bank’s exposure to Bitcoin and certain other cryptocurrencies.

Regulators in South Africa will first move to establish know-your-customer rules for crypto exchanges and create systems for the surveillance of the asset class in order to prevent money being laundered out of the country, Naidoo said. Thereafter, investor-protection guidelines and rules for managing capital risk in the banking sector should come into effect.

Firms offering services related to digital currencies in South Africa have been eager for better rules to take shape and drive up trust in the asset class.

“Any incidents of fraud draw attention to the importance of regulation and we hope that the clear guidelines in South Africa — and globally — could lead to wider adoption by enhancing stability and trust in the market,” said Marius Reitz, general manager in Africa for Luno.

“Regulations will also raise standards and barriers to entry and weed out bad actors or service providers with a low regard and capability to safeguard customer information and money,” Reitz said.

© 2021 Bloomberg


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“Regulators in South Africa will first move to establish know-your-customer rules for crypto exchanges and create systems for the surveillance of the asset class in order to prevent money being laundered out of the country, Naidoo said”

I sense worry in the politburo..

Bitcoin is slowly being recognised as “Money” and its advancing against FIAT

Freedom from the plutocrats and this will triumph in Africa

(Sibling: Monero) is peer to peer as is Bitcoin
Ethereum, claiming to be decentralised is still hosted by Amazon Web Services (AWS). Not exactly private
Obtain a physical wallet to get off exchanges

Reading the article it almost sounds as though all crypto exchanges are busy with criminal activity. This is not the case it is the “regulator” that is fast asleep!!! There are no regulations to comply with at present!

Most proper exchanges does KYC anyway and have the info. They should just not share that info at present.

Naidoo is a “banking” regulator and probably the wrong man to consult for regulating crypto. If the idea is to regulate it like a bank it wont work and you will have capital flight. It will become an offshore investment like most other asset classes in SA.

It has long been time to get rid of exchange controls. Its an apartheid system. People want to use crypto for payments and often it might be cross border payments. because its faster and cheaper than the banks and mr. naidoo’s establishment!!! They will obviously try and block it and this is when EVERYBODY will use legal ways to get money out of the country FOREVER to use in the crypto space OFFSHORE. Like any other investment. DEFI offers many opportunities these guys want to block.

I am also not saying one wont declare your offshore crypto holdings. Like any other investment you will. But transactions will happen offshore in jurisdictions where silly ” central bankers” don’t try and protect their skelm and expensive big bank buddies.

Think very carefully. It will be very difficult to turn around. Crypto and blockchain wont go away. Nor will DEFI. There are many service providers all over the world that will facilitate all crypto and DEFI transactions. Has nothing to do with trying to dodge tax launder money etc. Its about participating out of ones own free will. Not the anc’s will. TSK!!!


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