South African Reserve Bank confirms that it is looking at crypto regulation

Speaking at a virtual PSG webinar, the Deputy Governor of the South African Reserve Bank (SARB), Mr Kuben Naidoo (Deputy Governor), has confirmed that crypto asset service providers (CASPs) will still be included in Schedule 1 of the Financial Intelligence Centre Act, 38 of 2001 (FICA), as was first proposed by the Minister of Finance in the amendments to Schedules 1, 2 and 3 of FICA published for public comment on 19 June 2020.[1]

The Deputy Governor also spoke about the intention to declare crypto assets as a financial product under the Financial Advisory and Intermediary Services Act, 37 of 2002 (FAIS Act), which, according to the three-year regulation plan issued by the Financial Sector Conduct Authority (FSCA) earlier this year, remains a high priority for the FSCA.[2]

This marks a decided shift in how crypto is being perceived, particularly as regulators have moved away from the cautionary approach taken in South Africa’s first public statement concerning virtual currencies in 2014.[3] The Deputy Governor has acknowledged that since then, the regulators have followed the global crypto environment closely and have seen that there is a need to regulate this burgeoning sector.

Last year, the crypto asset regulatory working group of the Inter-Governmental Fintech Working Group (IFWG) published its long-awaited crypto asset policy paper. It dispelled some of the uncertainty on bringing crypto assets into the existing regulatory regime by setting out numerous recommendations on how to regulate crypto in a phased and structured manner.[4]

However, as noted by the Deputy Governor, there are still some lingering concerns for crypto regulation, especially as far as anti-money laundering / counter-terrorist financing (AML / CFT) and tax laws are concerned.

In line with the phased approach that was hinted at in the IFWG policy paper, the Deputy Governor explained that the SARB is planning other key developments, including a regulatory framework for crypto exchange platforms that will ensure compliance with AML / CFT measures, exchange control regulations and tax laws. The Deputy Governor also emphasized that users will still need to be warned about the inherent risks of crypto investments.

On timing, the Deputy Governor said that these developments could take anywhere between a year and 18 months.  In the interim, Webber Wentzel continues to track these developments and will keep clients well apprised of any significant changes.