South Africa: Government Panel Proposes Strict Crypto Regulations

An intergovernmental panel in South Africa comprising the central bank, treasury, and financial regulators is calling for the enactment of strict crypto regulations in the country.

Strict Crypto Policing in South Africa

In a paper published by the Intergovernmental Fintech Working Group (IFWG) in South Africa, the government panel argued for the establishment of a clear-cut crypto regulatory infrastructure in the country.

In a series of recommendations put forth by the panel, the IFWG outlined the modalities necessary for creating robust crypto regulations in South Africa. According to the IFWG, the growth of the digital economy makes it necessary for South Africa’s crypto market to not operate outside of the ambit of financial regulators in the country.

Given the fragmented nature of crypto regulations across the world, the IFWG maintained that South Africa needs to settle on emerging international standards like those of the Financial Action Task Force (FATF). Back in 2019, the FATF released guidelines detailing how member countries should police their local crypto industry with regulations like the “Travel Rule” and other policies aimed at combating cryptocurrency-related money laundering.

Apart from anti-money laundering (AML) laws, the IFWG also called for clear-cut regulations for token-based fundraising. An excerpt from the paper detailing its recommendations for initial coin offerings (ICO) reads:

“The regulations of ICO issuers must be aligned as far as possible, to the regulations of issuers of securities or ‘over-the-counter’ financial instruments. It is therefore recommended that the security token offerings be subjected to regulations under the securities legislation.”

Cryptos Not Legal Tender in South Africa

The IFWG report also touched on the use of cryptos as money in South Africa. In one of its recommendations, the intergovernmental panel argued for cryptocurrencies to not be recognized as legal tender or electronic money. Back in 2018, the country’s central bank declared that cryptos did not meet the requirements for money.

The IFWG’s recommendations could form the framework for which the country’s government could create laws for the crypto industry in the country. Digital currencies remain popular in South Africa amid growing investment scams looking to swindle unsuspecting victims.

So far, South Africa’s crypto regulations have been limited to taxation. In the absence of clear-cut laws, some major banks have shut down accounts owned by cryptocurrency exchanges.

While the government is yet to firm up crypto laws in South Africa, the country’s central bank has been heavily involved in testing blockchain technology.