New cryptocurrency rules to be introduced in South Africa in 2022
South Africa’s financial regulator is planning to unveil a regulatory framework covering cryptocurrencies early next year to help protect vulnerable members of society from highly risky assets.
The rules, designed in concert with peers like the prudential authority and the financial surveillance board, will establish how trading in coins such as Ethereum, XRP and Litecoin should be conducted, FSCA commissioner Unathi Kamlana said in an interview on Friday.
Other issues to be examined include how the currencies interact with traditional financial products, the risks they pertain to bank balance sheets, and whether they threaten fiscal stability.
“What we want to be able to do is to intervene when we think that what is provided to potential customers are products that they don’t understand that are potentially highly risky,” Kamlana said. “We must be very careful to not just legitimize them.”
The introduction of regulations follows two major crypto scams that originated in South Africa, both of which led to the disappearance of billions of dollars in investments.
Digital currencies have moved from the periphery of the finance world to the mainstream over the past few years, leading to deeper scrutiny worldwide to prevent providers operating unfettered.
While Kamlana said that cryptocurrencies don’t pose a systemic risk to the stability of the financial services sector yet, the FSCA sees them as an asset rather than a currency. The regulator is monitoring the South African Reserve Bank’s plans to develop its own stable coin, seeing that as the most responsible approach to innovation, Kamlana said.
“I think that if I were to give advice to retail investors, I would say wait to see what comes out of the process of the work of the central bank,” he said. “The best outcome in terms of stable coins is what comes out of central bank innovation, given their reliability and stability.”