Speaking during a webinar on June 12, Naidoo stated that the laws will likely be released within the next 18 months and will not identify cryptocurrencies as a payment option but as a financial product that can be utilised in the mainstream sector.
“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,” he said.
Benefits of crypto to financial systems
He added that, away from the hype around cryptocurrencies, central banks globally are studying the sector to understand how it can be beneficial to the financial system besides the ongoing regulatory efforts.
Furthermore, he noted that some cryptocurrencies introduce genuine technological advancements that can improve sectors like payment.
As a financial product, cryptocurrencies will fall under the country’s Financial Intelligence Centre (FIA). Through the agency, the government will monitor the use of digital assets in vices like money laundering, tax evasion, and terrorist financing.
Additionally, the regulation will outline the management of cryptocurrency exchanges in the country, with the main focus on the crypto listing. The laws will also borrow a leaf from existing banking sector regulations like Know Your Customer (KYC) guidelines.
Not picking a winner
According to Naidoo, although the cryptocurrency market is volatile, the central bank is not concerned with which assets will emerge victorious. He stressed that the institution needs to offer a level playing field for consumers through healthy warnings.
In building regulation, Naidoo noted that the SARB has received positive feedback from crypto exchanges that have welcomed the idea.
Amid the growth of cryptocurrencies, SARB and other financial agencies embarked on making amendments to the country’s laws to incorporate crypto assets. For instance, in March, the South African Treasury announced further crypto regulations might be finalised by 2022.
