Kuben Naidoo – South African Reserve Bank (SARB) deputy governor has confirmed that the country will implement cryptocurrency regulations over the next 12 – 18 months that will classify them as a financial asset that can be used in the mainstream sector rather than a payment option.
Naidoo confirmed that regulations partially supporting the sector are set to be rolled out during a webinar for local investment firm PSG. He stated that cryptocurrencies will be treated as a financial product rather than a payment option. According to Naidoo, most central banks around the world are paying attention to the broader crypto market, learning from it, and determining how it can be used. However, he emphasizes the importance of distinguishing genuine technological advancements and potential payment system improvements from “hype.”
We have no intention of regulating it as a currency because you can’t walk into a store and buy something with it. Instead, we now believe that [cryptocurrencies] should be regulated as financial assets. There is a necessity to regulate it and bring it into the mainstream, but in a way that balances the hype with the necessary investor protection.
As a financial product, cryptocurrencies will be subject to the Financial Intelligence Centre Act (FICA) and will be scrutinized for money laundering, tax evasion, and terrorist financing. Naidoo went on to say that the SARB intends to create a regulatory framework for South African exchanges to allow for cryptocurrency listings, which will include traditional banking regulations like Know Your Customer (KYC) rules and exchange control regulations.
The question is not whether it will rise or fall; the central bank’s job is not to pick winners and losers in an investment race. Our job is to regulate something so that people have sufficient ‘warnings,’ but crypto is far too buoyant to be used as a payment space.
According to Naidoo, the SARB’s position on cryptocurrencies has shifted significantly in recent years. The central bank believed there was no need for regulatory oversight five years ago, but a shift in attitude to define cryptocurrencies as financial products has changed this view.
He continued: By all definitions, [cryptocurrencies] are not a currency, but rather an asset. It is something that can be traded, something that is made. Some are supported, while others are not. Some may have a genuine foundation, such as real economic activity.
After completing a technical proof-of-concept in April 2022, the SARB is also looking into the possibility of introducing a central bank digital currency.
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