World Economic Forum announces new structure to shape policy framework for regulating digital money. 
Photo: REUTERS/Benoit Tessier/File Photo/File Photo
World Economic Forum announces new structure to shape policy framework for regulating digital money. Photo: REUTERS/Benoit Tessier/File Photo/File Photo

Global governance of cryptocurrencies

By Siphelele Dludla Time of article published Jan 27, 2020

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JOHANNESBURG - Market players welcomed the announcement by the World Economic Forum (WEF) on Friday on the establishment of a global governance structure to forge a common regulation policy for digital currencies.

The Global Consortium for Digital Currency Governance would increase access to the financial system through innovative policy solutions that are inclusive and inter-operable by designing a framework for the governance of digital currencies, including stable- coins.

SA Reserve Bank Governor Lesetja Kganyago, in a statement, said the industry should work hand-in-hand with regulators to develop the financial inclusion system of cryptocurrencies.

“Any evaluation of digital currencies should consider both policy and business objectives, as well as the unique circumstances facing different economies around the world to fully evaluate their risks and benefits,” Kganyago said.

“Bringing together diverse perspectives through this consortium would allow for this holistic review; but to achieve this we need the public and private sector to collaborate.”

Marius Reitz, general manager for Africa at crypto exchange Luno, said they welcomed the introduction of a strong regulatory body in the cryptocurrency industry.

Reitz said the introduction of a regulation system would root out bad characters who gave cryptocurrencies a bad reputation around the world.

“We see this as a positive development. We support regulation and interaction with role-players, as this will increase financial inclusion and reduce the risk of counterfeit money and unsavoury practices,” Reitz said.

“The trend of adopting digital currency as a central payment system will not happen overnight.”

Reitz said the lack of regulation had contributed to the slow growth of cryptocurrencies, and their adoption as a genuine payment system.

“In the absence of regulation, banks would become de facto regulators and that would slow down the growth of the industry, while access to bank accounts for reputable cryptocurrency traders would become difficult,” he said.

“This year Luno plans to engage the public to educate people about cryptocurrencies. We foresee positives on the price perspective, and expect more financial institutions and institutional investors to enter the market.”

Reitz said they were in regular contact with SARB to assist in developing a regulatory framework.

One of South Africa’s biggest banks - FNB - last year gave notice to cryptocurrency trading platforms, such as VALR.com and Luno, that it would terminate its banking services.

FNB cited a comprehensive review of the potential risks associated with these entities, particularly given that appropriate regulatory frameworks were not yet in place.

The bank was not available for comment on these new developments on Friday, requesting more time.

BUSINESS REPORT 

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