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South African Reserve Bank to Strictly Regulate Cryptocurrency in 2020

The South African Reserve Bank (SARB) is planning on introducing new regulations on cryptocurrency, which according to Kuben Naidoo, SARB deputy governor, will be fully implemented and enforced in the first quarter of 2020. The purpose of the new regulations noted in the report is to stop the citizens from using digital currency to evade sanctions or controls.

The coming regulations are regarded as a framework for how local currency should be exchanged and sent outside the country via cryptocurrencies and will be enforced by the SARB.

Concerns are being raised by the South African blockchain development community, SA Crypto. A representative said, “The implications of the SARB clamping down on cryptocurrency use for the purpose of stricter capital controls are far-reaching and alarming.”

Concerning the planned regulations, the local bank FirstRand Bank (FNB), has already closed all the crypto services it offers to citizens, stating that:

“FNB considers this to be a prudent course of action following a comprehensive review of the potential risks currently associated with these entities, particularly given that appropriate regulatory frameworks are not yet in place.”

AltCoinTrader, one of South Africa’s largest cryptocurrency exchanges, showed how disappointed they were with FNB’s decision to quit providing services for cryptocurrencies merchants. AltCoinTrader has been with FNB since 2015.

Richard de Sousa, AltCoinTrader chief executive, issued a statement where he showed his displeasure towards FNB’s decision to discontinue its crypto services.

“We are disappointed that a financial institution would succumb to international pressure like this, with banking services being denied to individuals and industry players around the globe,” he said.

Image via Shutterstock

SARB to Introduce Crypto Regulation

The South African Reserve Bank (SARB) announced on Wednesday plans to introduce a regulatory framework for cryptocurrencies, Kuben Naidoo, the Deputy Governor of the Central Bank, revealed.

After years of taking a soft stance that it would not regulate the crypto industry, the Central Bank of South Africa has changed their mind by working to establish a regulatory framework to govern digital asset transactions.

In a webinar titled: ‘The future of money, banking and crypto’, organized by financial services firm PSG Konsult Ltd, Naidoo said: “Our view has changed and we now regard it [cryptocurrency] as a financial asset and we hope to regulate it as a financial asset. There has been a lot of money that has flowed in, and there is a need to regulate it and bring it into the mainstream.”

The Deputy Governor stated that the regulatory framework for the use of cryptocurrencies will perform a crucial role in ensuring investor protection and confidence and creating a safer crypto ecosystem in South Africa.

“The use of crypto for money-laundering and other illicit activities is a source of concern. 90% of transactions involving crypto-currency in the US are for the purchase of opioids or gambling tokens,” Naidoo highlighted.

The executive mentioned that while regulations could take 12 to 18 months to see their implementations, some know-your-customer (KYC) rules and licenses for exchanges will be enforced much earlier. He said the Central Bank is close to finalizing the exchange control rules and requirements.

Naidoo also disclosed possible plans by the Central Bank to issue a national Central Bank Digital Currency (CBDC). He stated that the regulator is currently conducting research and experiment on a CBCD project.

Digital Road Ahead

South Africa is one of the top 10 countries for cryptocurrency adoption in Africa, according to a recent report by Chainalysis, a blockchain data platform.

The crypto regulatory landscape in the country is still in a state of uncertainty. Although regulators like the Central Bank and the Financial Services Conduct Authority (FSCA) are yet to implement any regulations, the sentiments of these agencies towards crypto regulations have evolved.

Some regulatory framework is now expected not so far in the future. Such movements have been triggered by the rising concern of customer protection in the wake of the country’s $4 billion in cryptocurrency scams.

Regulation in the crypto industry is essential to ensure the new technology goes mainstream and lays the foundation to develop key relationships, such as with banking institutions.

SARB governor: CBDCs must tackle a "serious challenge" at WEF 2023.

At the World Economic Forum (WEF) 2023, which was hosted in Davos, Switzerland, South African Reserve Bank (SARB) governor Lesetja Kganyago addressed some of the difficulties that surround the adoption of central bank digital currencies (CBDCs).

Kganyago shared his thoughts on CBDCs at a panel discussion at the World Economic Forum 2023 titled “In the Face of Fragility: Central Bank Digital Currencies.” He questioned whether or not there is a genuine issue that can be handled by this new technology.

Kganyago questioned whether or not this was a case of a solution seeking for a problem, or whether or not there was a genuine issue that needed to be addressed.

The governor of the central bank also brought up the fact that the nations who are looking into CBDCs and doing research on them have cited a number of different reasons for wanting to establish them.

This involves bringing the central bank up to date, improving the efficiency of national payment systems, addressing the failure of domestic markets, and ensuring that everyone has access to sufficient financial resources.

On the other hand, the official from the government brought up the issue of demand.

Before CBDCs can be implemented, there has to be a discussion on a national level, as Kganyago pointed out.

He stated that before making this available to the general public, central banks should first determine whether or not the general public is interested in using it.

In light of these arguments, Kganyago said that the South African Reserve Bank (SARB) is approaching the issue of CBDCs with extreme caution. According to what he had to say, ” We are going to be excellent pupils when it comes to retail CBDCs,” and ” I would rather be a follower than a first mover.”

Back in 2021, the governor of the SARB expressed his disagreement with the notion that cryptocurrencies should be classified as currencies.

The official from the government said that cryptocurrency only satisfies two of the three standards for currencies, and argued that it does not have widespread usage.

Deal Box offers $125M blockchain and Web3 venture fund

According to a press release dated January 18, the capital markets consulting and token offering platform Deal Box, which has its headquarters in the United States, has established a new venture capital arm that will invest a total of $125 million in blockchain and Web3 companies.

The fund that will be used to make investments in enterprises operating in the growing growth, real estate, fintech, funtech, and social impact sectors will be given the moniker Deal Box Ventures.

The following statement was issued by the founder and chairman of Deal Box, Thomas Carter, in response to the recent development: “Our partnership with Deal Box Ventures marks a significant achievement on our way to becoming investors in the blockchain industry’s most innovative and potentially game-changing startups. By streamlining and rethinking the conventional fundraising processes, we will equip these start-ups with the resources and financial environment they need to be successful.”

By acquiring shares in each of the aforementioned businesses, Deal Box was able to make its initial investments in the firms Total Network Services, Rypplzz, and Forward-Edge AI respectively.

In order to integrate digital and real items and to facilitate the creation of location-based experiences, Rypplzz makes use of blockchain technology.

While Total Network Services claims that it has developed a blockchain Universal Communication Identifier to improve the safety of supply chains, Forward-Edge AI asserts that it is using the same technology to work on improving the human condition.

Before it started its investment arm, Deal Box was already a pioneer in its sector when it came to providing legal, accounting, and capitalization table advising services to the founders of fledgling companies.

One of the components of its focus that apply to digital securities is the issuing of tokenized bonds or shares by corporations as a method of acquiring access to investor money. This is one of the aspects that pertain to digital securities.

Since its founding in 2005, the firm claims that it already has more than 500 satisfied clients.