Financial regulators in South Africa lay the foundation for “phased and regulated” regulation of cryptocurrencies. The move is largely a reflection of the laissez-faire principle that has been used for the past seven years and has been driven by the growing degree of retail interest in the country’s cryptocurrency.
In a job document released Friday, the Intergovernmental Working Group on Financial Technology, or IFWG, under the auspices of the Cryptoasset Regulatory Working Group, provided a roadmap for implementing a regulatory framework for crypto service providers.
South Africa’s most important national cryptocurrency policy so far has been prudence, but also laissez-faire. In 2014, the National Treasury issued a public statement addressing the problem, along with the South African Reserve Bank and the country’s financial regulator, as well as financial information and tax authorities. Her tone was cautious, but not duplicating, and warned the public that cryptocurrencies can be traded at your own risk, and that no legal protection or recourse will be given in case of problems.
Commentators point out that several factors, including the rise of the South African cryptocurrency market to more than $ R2 billion ($ 147 million) in daily trading earlier this year, have made this old policy unsustainable.
A new IFWG document claims that despite the establishment of a set of rules for scaling up, cryptocurrencies remain “inherently risky and volatile”, and the potential financial losses incurred by trading in cryptocurrencies remain high.
Six overarching principles will guide the country’s approach to development. This implies a “performance-based perspective” that ensures that the principle of “same activity, same risk” drives regulatory decisions; implement measures that are in line with the risk; Take a collaborative approach to regulating cryptoassets; Stay up to date on the world’s best practices; Promoting digital financial culture among consumers.
The document also contains 25 recommendations on how to regulate cryptocurrencies in relation to three main areas: Combating money laundering and countering the financing of terrorism, international finance laws and enforcement of financial sector laws. The latter indicates that South Africa’s regulatory authority for the financial sector will have the authority to prevent market abuse – such as fraud and behavior on the market – and implement measures against relevant breaches in the industry.
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Together with the published document, IFGW issued a press release outlining the strategy, raising concerns about the asset class and the surrounding ecosystem. The IFGW pointed to decentralization as a disadvantage rather than a plus, leaving consumers and sellers without contacting a central authority or organization that can resolve user errors, such as using the wrong cryptocurrency address.
IFGW is also still concerned about the manipulative nature of many cryptocurrency marketing materials, price volatility and fraudulent activities such as Ponzi schemes. In fact, the largest Ponzi scheme in the country this year involved a company targeting Bitcoin traders (BTC) which collected 23,000 BTC in investment holdings from 26,000 members worldwide.