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South Africa Pioneers Blockchain-Enabled Property Register Pilot Project

The Centre for Affordable Housing Finance in Africa (CAHF) has teamed up with Seso Global, a blockchain property registry company, to develop the first-ever blockchain-powered property register in South Africa.

The pilot projectwill comprise of nearly 1,000 government-subsidized properties found in four sites in Makhaza, Khayelitsha. This means they are not yet registered on the nation’s Title Deeds Registry.

Seso Global’s CEO, Daniel Bloch, stipulated that this was an exceptional project because blockchain technology would be instrumental in revamping the property registry in the country through the creation of an immutable record about house ownership.

The Seso platform has been created in such a way that transactions and records, even for deceased estates, are integrated with third parties who aid proceedings, including mortgage lenders.

Bloch stipulated: “For the time being, property owners will record these transactions at the Transaction Support Centre, a walk-in housing advice office created by CAHF and 71point4 located in the area. But over time, we will record transactions through the Seso app.”

South Africa’s title deed problem

South Africa has been grappling with a severe titling problem. Kecia Rust, CAHF’s CEO, acknowledged that the government had built at least three million RDP houses since independence.

Nevertheless, an analysis by CAHF revealed that only 1.9 million of them had title deeds. Moreover, an estimate by the National Department of Human Settlements, Water, and Sanitation (NDHSWS) showed that the title deed backlog stood at 511,752 for RDP properties developed before 2014.

The blockchain-based pilot project seeks to eliminate this challenge in South Africa by offering a transparent and immutable property register.

Image via Shutterstock

United Africa Blockchain Association Cries Foul of FNB’s Crypto Termination

The United Africa Blockchain Association (UABA) has lamented the decision by First National Bank (FNB) to terminate its banking services to crypto exchanges, as well as intermediaries trading in cryptocurrencies.

The bank stated: “Following a comprehensive review of the potential risks currently associated with these entities, particularly given that appropriate regulatory frameworks are not yet in place. […] The decision to terminate our banking services to these entities does not apply to individual customers. Due to the confidential nature of our customer relationships, FNB cannot provide any information on specific bank accounts.”

UABA has stipulated that even though South Africa does not presently seem to have any regulations about cryptocurrency ownership, the Crypto Assets Regulatory Working Group availed a Consultation Paper in January that made regulatory proposals in this area.

UABA affirmed: “Registration process for crypto asset service providers was expected to be implemented by the first quarter of 2019. This, to our best of knowledge, is yet to take place. Then it would be followed by a review of existing regulatory frameworks followed by new regulatory requirements or amendments to existing regulations. Thus far, there hasn’t been taken.”

UABA also added: “There is currently no FinTech regulation for crypto assets, nor are crypto-assets prohibited. Most of the financial sector legislation which applies to financial products and financial services pre-dates crypto assets and other digital assets, and it is therefore not surprising that none of the financial sector laws dealing with the issue and sale of financial products apply (at least not expressly) to crypto-assets.”

UABA’s concerns are pegged to the fact that FNB’s crypto termination could jeopardize cryptocurrency adoption in South Africa.

Image via Shutterstock

BitMEX Invests in South Africa’s Largest Bitcoin Exchange

In a bold financial move, the parent company of cryptocurrency exchange BitMEX has decided to invest in South Africa’s biggest Bitcoin exchange, VALR.

Bitcoin Crypto Exchange, VALR

The newly founded Bitcoin exchange offers safe digital trading for anyone and popular cryptocurrencies supported by their exchange include but are not reserved to Bitcoin (BTC), Ether (ETH), Ripple (XRP), and Cardano. Although it was only launched in 2019, it has now grown to be a popular international exchange.

100x Ventures Dreams of Going Global

Parent company of BitMEX, 100x Ventures, was hypothesized to have invested in VALR for three key reasons.

The first reason that came into consideration was that it enabled the investment arm to expand its fintech horizons and it allowed the company to grow in overseas markets. Furthermore, 100x Ventures was able to meet the demands of regional exchanges as well as trading services with the new alliance formed with VALR.

Lastly, the investment might have executed by 100 Ventures because of the ever-growing and trending regional Peer-to-Peer (P2P) Bitcoin market. Outside of dominant countries hosting major cryptocurrency markets, Bitcoin exchanges are known to be less well-regulated or not as transparent in their crypto transactions. Consequently, this led to a surge of Peer-to-Peer crypto exchanges, which allowed investors to trade directly with each other.

Places in the world that record huge P2P crypto trading volumes include India, Mexico, and the Philippines, where a proper exchange infrastructure is often lacking. Since there is an increase in demand for regional exchanges around the world, 100x Venture thinks that its investment could be a bridge that joins predominant crypto markets with smaller ones. CEO and co-founder of BitMEX Arthur Hayes commented regarding the alliance with VALR Bitcoin exchange:

“South Africa has an incredibly exciting and fast-growing cryptocurrency ecosystem, and we believe VALR is well-placed to capitalize on future growth of bitcoin trading. In VALR we’re backing not only a successful early-stage business, but a management team with the ability to scale operations significantly.”

BTC Future Continues to Shine for BitMEX

Because of their investment, 100x Venture is now able to gain exposure in a developing crypto market as promising as South Africa. For several years on end, its finance affiliate BitMEX has also remained on top of their game. However, with the newly formed crypto alliance, both the P2P crypto trading platform and its parent company are now able to diversify their business even more, due to regional investments.

BitMEX remains a competitive player in the crypto field. In fact, the cryptocurrency exchange possesses an open interest of $1.02 billion dollars, which consists of double the amount of its competitors, such as Binance and Bybit.

Unclear Crypto Regulations in South Africa Alarm Entrepreneurs

The uncertainty surrounding cryptocurrency regulations in South Africa is fueling the move by the country’s homegrown crypto firms to more crypto-friendly countries.

As reported by Bloomberg, the clamour by the country’s entrepreneurs, particularly invested in cryptocurrencies is yielding no fruits, a situation that is limiting potential growth.

With crypto trading platforms such as Luno with registered headquarters in the UK a commonplace in the country, it lends credence to the claims that South African authorities “have been incredibly slow in terms of regulation in the industry and that leads to businesses looking internationally,” said Revix Chief Executive Officer Sean Sanders, whose firm is considering relocating its headquarters to the United Kingdom. He added:

“In an unregulated environment, a customer arrives at our platform with scepticism, and rightfully so.”

Entrepreneurs shared with Bloomberg that the lack of clear regulations is also preventing businesses to promote their services via social media platforms including Facebook and Twitter, a situation that has dampened growth.

Additionally, there is a banking divide in dealing with digital currency service providers in the country. While institutions like the Standard Bank Group Ltd. provide unrestricted access to all of its services to crypto firms, entities like First National Bank has no banking relationships with virtual-currency exchanges or traders.

The lack of regulatory framework has also made it difficult for crypto platforms to operate bank accounts, said Luno head Marius Reitz. “In turn, this makes it very difficult for customers to buy Bitcoin with their local fiat currency.”

The regulatory situation in South Africa is as concerning as that in Nigeria, Africa’s largest cryptocurrency marketplace. With governments failing to embrace the next shift in innovations, emerging firms are either developing strategies to circumvent unfavourable regulations set out by the government, such as by leveraging peer-to-peer trading, or making moves to take their businesses elsewhere, where they will be more welcome.

$3.6B Worth Bitcoins Scam, Founders of South African Crypto Exchange Africrypt Are Missing

The total value of $3.6 billion Bitcoins disappeared while the founders of South African cryptocurrency exchange AfriCrypt are missing, Bloomberg reported.

A pair of the brother of 20-year-old Ameer Cajee and 17-year-old Raees Cajee founded South Africa-based digital currency exchange AfirCrypt in 2019 to attract high-net-worth individuals and celebrities.

The company claimed its platform was hacked on April 13 but urged its investors not to report the incident to lawyers and authorities, claiming the report would hinder the recovery of funds.

Hanekom Law Firm has accepted the request from their client of the victim for further investigation. Yet, the law firm was doubtful and sceptical related to the hacking incident, comment this:

“We were immediately suspicious as the announcement implored investors not to take legal action. Africrypt employees lost access to the back-end platforms seven days before the alleged hack.”

The law firm found that later the pair of founders of AfriCrypt immediately moved to the UK after the incident and closed all contact information.

Reportedly, the brothers have transferred 69,000 BTC from AfriCrypt’s account and customer wallet to an account in the First National Bank (FNB) in Johannesburg. According to the current bitcoin price, the transaction price of $32,968, worth an estimated $2.275 billion.

Attorney Hanekom stated that these funds were transferred to various dark web tumblers and mixers, causing challenges with severe fragmentation and untraceable funds.

The authority said the investigation was undergoing and transferred the case to a special division of the South African Police Force. Yet, the South African government faces legal challenges due to its incomprehensive laws targeting cryptocurrencies assets.

Four Countries to Conduct Cross Border CBDC Payment Trials

The Bank for International Settlements (BIS) has joined forces with the central banks of South Africa, Malaysia, Singapore, and Australia to kick start a project dubbed Dunbar aimed at testing the use of central bank digital currencies (CBDCs) in cross border payments.

Per the announcement on Thursday:

“Led by the Innovation Hub’s Singapore Centre, Project Dunbar aims to develop prototype shared platforms for cross-border transactions using multiple CBDCs. These multi-CBDC platforms will allow financial institutions to transact directly with each other in the digital currencies issued by participating central banks.”

By rolling out the trial, the central banks intend to enable financial institutions to cut the time and cost of transactions and eliminate the need for intermediaries.

CBDCs represent the digital form of a nation’s fiat money. They are controlled directly by the country’s central bank and are backed by national credit and government power.

To stabilise the control over the supply and demand of currency for the seemingly inevitable cashless society in the future, countries are now launching experiments to test the workings of CBDC.

Enhancing the G20 roadmap for cross-border payments

According to the report:

“Project Dunbar’s work will explore the international dimension of CBDC design and support the efforts of the G20 roadmap for enhancing cross-border payments.”

The CBDC payment trials facilitate seamless multi-currency fund transfers, which is a significant step towards the global vision of making payments cheaper and faster.

In October 2020, the BIS released a report identifying the foundational principles necessary for any publicly available CBDCs to help central banks meet their public policy objectives. Some of the principles entailed CBDCs coexisting with cash and other types of money in a flexible and innovative payment system.

South African Regulator to Unveil Consumer Protection Regulations in Early 2022

The South African Financial Sector Conduct Authority (FSCA) is on track to unveil an encompassing regulatory framework, aiming at protecting consumers that emanate in the digital currency ecosystem from scams.

According to a Bloomberg report, citing the confirmation of the plans from regulator’s commissioner Unathi Kamlana, also it is noted that the regulator wants an avenue where it can control fallouts from risky cryptocurrency investments.

With plans on track to release the regulations early on in the coming year, Kamlana said all proposed rules will be formulated in close consultation with the Prudential Authority and Financial Surveillance Board of the South African Reserve Bank.

“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,” said Kamlana. “We must be very careful to not just legitimize them.”

South Africa is a nation that has come off as a hub for digital currency innovations, however, some actors have taken advantage of the country’s benevolence. Back in June, Blockchain.News reported on the vanishing of the operators of the South African crypto trading platform, AfriCrypt which saw about $3.6 billion of user’s funds. When the incident happened, the FSCA said its hands were tied as the nascent asset class remains unregulated in the country.

The regulator also had a brawl with Binance a few months back when the exchange was accused of operating illegally in the country. Binance, which has had challenges with other regulators around the world challenged the legitimacy of the FSCA, saying it complies with the local regulations defined by the South African Financial Intelligence Centre.

Should South Africa issue the proposed rules, it will take a forward-thinking path wherein the digital currency ecosystem can thrive. Global industry stakeholders are advocating and open-minded to progressive regulations and there is bound to be a welcome reception in the South African blockchain ecosystem.

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.

South Africa's Monetary Authority Ask Banks to Work with Crypto Exchanges

The South African Reserve Bank (SARB), the Central Bank of South Africa, has formally advised local commercial banks to work with cryptocurrency exchanges/crypto asset service providers (CASPs).

The Central Bank on Thursday issued a guidance note to commercial banks for dealing with transactions by crypto asset service providers.

In the note, signed by Fundi Tshazibana, the CEO of the South African Reserve Bank, stated that the Central Bank is aware that certain banks in the nation have previously opted to terminate banking services offered to crypto service providers.

According to the note, the banks opted for cutting off companies that offer cryptocurrency services because of the risks associated with money laundering, terrorism financing, and proliferation financing that come with the crypto service providers’ lack of formal regulatory requirements.

In the note, although the SARB acknowledged the banks’ reasons for such terminations, it went ahead and said that risk assessment by banks should not imply that they should seek to avoid risk entirely by cutting off banking services from crypto asset service providers (also known as de-risking).

Banks outright terminating crypto firms’ accounts threatens financial integrity in general, the note said.

For this reason, the financial watchdog encouraged banks to evaluate risks on a case-by-case basis instead of avoiding crypto-related businesses entirely.

South Africa’s Central Bank concluded the note by saying that the decision to de-risk should be made only if the risk posed by a particular client or business is too great to manage successfully. The SARB further emphasized that the decision must be made with due diligence and consideration.

Welcoming to Regulate Crypto Assets

The SARB announcement comes after South African crypto service providers have long argued that unbanking them is discriminatory and hurtful to them.

In March last year, crypto business providers in the country raised concerns that the lack of clear regulations in the digital assets industry hinders their business operations.

In March 2020, First National Bank, one of South Africa’s big five banks, terminated the accounts of major crypto exchanges, including Luno and VALR.

In October last year, Standard Bank, another local big bank, sent shockwaves through South Africa’s cryptocurrency industry when it notified automated cryptocurrency arbitrage services that it was terminating their accounts.

The greenlight issued by the Central Bank for lenders to serve crypto clients comes after the regulator recently announced plans to regulate the crypto industry.

Last month, the South African Reserve Bank disclosed plans to introduce a regulatory framework to govern crypto transactions, and classify cryptocurrency as an asset, rather than a currency.

South Africa Classifies Crypto as Financial Assets

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The Financial Sector Conduct Authority (FSCA), a financial institutions market conduct regulator in South Africa, announced on Wednesday that the country has declared crypto assets as financial products in the jurisdiction.

In a gazette notice published on Wednesday, the Financial Sector Conduct Authority defined crypto assets as “a digital representation of value” that is not issued by a central bank, but can be traded, transferred or stored electronically “for the purpose of payment, investment and other forms of utility.”

The watchdog said that move aims to make it easier for local regulators to monitor the market and help to safeguard users.

The change takes effect immediately and falls under the Financial Advisory and Intermediary Services Act 2022. The announcement is the first legal step that was required to bring the crypto sector within the South African legal framework.

In July, South Africa Reserve Bank (SARB) announced plans by the central bank to adopt legislation that aimed to classify and regulate crypto assets as financial assets to balance innovation and investor safety. During that time, Kuben Naidoo, the Deputy Governor of South Africa Reserve Bank (SARB), said the regulations intended not to recognize cryptocurrencies as a payment method but as a financial instrument that may also be used in the mainstream sector.

Under the proposed regulation, a person offering advice regarding crypto assets would be required to be licensed as a financial services provider and to comply with the relevant requirements of both FSCA and the country’s Financial Intelligence Centre (FIC). This aims to ensure proper monitoring, reporting and oversight by the FSCA and FIC overall crypto-asset transactions.

In August, South Africa’s central bank formally advised local commercial banks to work with crypto exchanges/crypto asset service providers (CASPs). In the past, some local banks were unwilling to offer banking services to digital asset providers.

In an attempt to avert financial crimes and illicit activities associated with crypto asset transactions, the central bank also announced plans to develop a regulatory framework for crypto exchanges and platforms to allow for crypto listing. The plan would also include compliance with know-your-customer (KYC) protocols and tax and exchange control requirements. It appears that the proposed regulations by South Africa are consistent with proposals being developed by other central banks and regulators in the international market.