In 2014, the National Treasury warned about the risks of using cryptocurrencies (referred to in the paper as “crypto assets”) for transacting or investing. It noted that no specific legislation or regulation existed for their use, and there was therefore no legal protection or recourse for users or investors.
The Reserve Bank, through the National Payment System Department, issued a position paper on crypto assets in the same year, highlighting the risks surrounding them, such as money laundering and the financing of terrorism.
In the absence of a legal and regulatory framework for South Africa, the acceptance of cryptocurrencies for the payment of goods and services is at the discretion of consumers and merchants.
The latest policy paper notes that the financial system is highly regulated to ensure that it is sound and safe, but cryptocurrencies do not have similar safety mechanisms.
It makes several proposals, including leaving crypto assets without legal tender status, not recognising them as electronic money.
It recommends that an appropriate regulatory framework be developed through a registration process for crypto-asset service providers, a review of existing regulatory frameworks followed by new regulatory requirements or amendments to existing regulations.
“The phased approach, starting with the registration requirement, could lead to formal authorisation and designation as a registered/licensed provider for crypto asset services operating in South Africa at a later stage.”
Other perceived risks of crypto assets include tax evasion and the circumvention of exchange controls.
The paper may be accessed on the Reserve Bank’s website (www.resbank.co.za/Publications). Stakeholders and the public are asked to comment by February 15.
African News Agency (ANA)