South African Reserve Bank Set to Regulate Cryptocurrencies as Financial Assets

The South African Reserve Bank (SARB) deputy governor Kuben Naidoo has confirmed that the country will roll out cryptocurrency regulations over the next 12 – 18 months that will not identify them as a payment option, but rather as a financial asset that can be utilised in the mainstream sector.

Speaking at a webinar for local investment firm PSG, Naidoo has confirmed that regulations partly supporting the sector are set to be rolled out. He noted that cryptocurrencies will not be treated as a payment option, but rather as a financial product. Naidoo says that most central banks across the world are focused on the broader crypto market and are learning from it and seeing how it can be used. However, he adds that it is important that we separate genuine technological advancements and possible improvements to payment systems from the “hype.”

We are not intent on regulating it as a currency as you can’t walk into a shop and use it to buy something. Instead, our view has changed to regulating [cryptocurrencies] as financial assets. There is a need to regulate it and bring it into the mainstream, but in a way that balances the hype and with the investor protection that needs to be there.

As a financial product, cryptocurrencies will fall under the purview of the country’s Financial Intelligence Centre Act (FICA) and will be monitored for money laundering, tax evasion, and terrorist financing activities. Naidoo added that the SARB then plans to develop a regulatory framework for South African exchanges to allow for crypto listings which would include traditional banking regulations such as Know Your Customer (KYC) rules and exchange control regulations.

Whether it goes up or down is not the question here  – the job of the central bank is not to pick winners and losers in an investment race. Our job is to regulate something so that people have an adequate ‘health warning’ – but crypto is far too volatile to be used as a payment space.

Naidoo said the SARB’s view of cryptocurrencies has changed significantly over the past couple of years. Five years ago the central bank thought there was no need for any regulatory oversight, but a shift in perception to define cryptocurrencies as financial products has changed this view.

He added:

By all definitions, it's [cryptocurrencies] not a currency, it’s an asset. It’s something that is tradable, it’s something that is created. Some have backing, others do not. Some may have a genuine underpinning, real economic activity.

The SARB is also investigating the possible introduction of a central bank digital currency, after having recently completed a technical proof-of-concept in April 2022.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.