The Reserve Bank of South Africa is set to begin regulating cryptocurrencies as financial assets in the next 18 months, as exchanges expect the move to drive adoption in the country.
The move to classify cryptocurrencies as a financial asset rather than a currency has been talked about for some time by the South African Reserve Bank (SARB). Deputy Governor Coben Shetty confirmed that the new regulations will come into effect over the next year, speaking in an online dialogue on Monday.
The cryptocurrency space has been left to develop organically in South Africa, with no clear regulations issued by the SARB until recently. The country has become a leader in cryptocurrency adoption, with it estimated that more than 6 million South Africans own some cryptocurrency.
Now that the SARB has finally taken a stand on the ecosystem, exchanges, traders and investors can begin to assess the implications. Cointelegraph reached out to prominent exchanges operating in the country to gauge the perception of SARB’s regulatory position.
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Marius Ritz, general manager for Africa at global crypto exchange Luno, was a proponent of clear regulatory standards for the cryptocurrency industry. In correspondence with Cointelegraph, Reitz welcomed the regulatory move and believes it will create a safer environment for users in the country:
“It will require crypto asset service providers (CASPs) to have FSP licenses and it will be easier for the public to identify a trusted and licensed platform. This will create a barrier to entry to those platforms without regard to the security of client funds and client information.”
Ritz said Luno has been in a fortunate position to anticipate regulatory changes in South Africa, given that the company operates in a variety of markets globally that already have stringent regulatory guidelines in place such as Malaysia and Singapore.
Luno GM for Africa said compliance with the new regulatory standards would not require a gradual change in its operations regardless of country-specific nuances. Luno already performs Know Your Customer (KYC) and Sanctions checks as well as Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) measures.
Ritz also suggested that more exchanges could benefit from Proof of Reserves verification. Although Luno is not required by law, he has conducted an audit of his crypto holdings to confirm custody of client assets to provide an additional level of trust for clients.
It’s also business as usual for VALR, another South African cryptocurrency exchange that has rapidly grown into a trusted platform for local crypto traders and users. CEO Farzam Ehsani told Cointelegraph that the company is already managing itself as a regulated entity, adopting Know Your Customer (KYC) checks and a risk management and compliance program.
VALR also has anti-money laundering and terrorist financing policies and has worked with authorities to combat the illicit transfer of funds. Ehsani was confident that developing regulations for the space would not lead to stifling controls, as the industry was set to fall under the purview of the Financial Intelligence Center:
“VALR is already registered with the Financial Intelligence Center and we have been working with the FIC for many years so any formal regulatory framework in this regard would formalize what is already in VALR.”
SARB continues to explore the potential use of a central bank digital currency (CBDC) through the Project Khokha initiative. A number of prominent players from the traditional South African banking sector have actively participated in the proof-of-concept testing of the proposed central bank digital currency settlement system.