In mid-January 2019, the SARB published its Consultation Paper on Policy Proposals for Crypto Assets, amid a growing interest, investment and participation in crypto assets by financial institutions and individuals and an estimated market capitalisation of about US$200 billion for crypto assets globally. Crypto assets are digital representations or tokens that are accessed, verified, transacted and traded electronically by a community of users. The name is telling. The SARB classifies them as assets and not currency.
SARB sees that crypto asset activity may be disruptive to the financial sector and may result in an increase in undetected illicit financial flows, money laundering and terrorist financing, an increase in consumer and investor protection concerns including market manipulation, tax evasion and exchange control circumvention. But they recognise benefits such as investment value, reduced premium, and use as a medium of exchange.
The consultation paper proposes limited regulation of crypto asset activity through the Financial Intelligence Centre (FIC) and their anti-money laundering and combating of financing of terrorism requirements.
The consultation paper proposes as a first phased-in step that crypto asset activities must be registered with the FIC to enable SARB to gain a better understanding of the market participants. Registration will be required for trading platforms, custodial wallets, custodial services, payment service providers and merchants, and service providers accepting payment in crypto assets. South African regulatory authorities currently propose not to impose market entry conditions for registered entities.
Public comment is invited by 15 February 2019. If these proposed laws will affect you, use the opportunity to do so. Comments may be submitted by email to SARBFINTECH@resbank.co.za.