South Africa’s top financial regulators and the country’s apex bank—South African Reserve Bank, have collectively issued a policy paper with 30 recommendations for the regulation of cryptocurrency and related service providers.
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A good number of top South African financial regulators jointly released a position paper to establish a regulatory framework for cryptocurrency.
The aim is to be compliant with the cryptocurrency standards set by the Financial Action Task Force (FATF), the international money laundering and terrorist financing watchdog.
The 30 paper recommendations is a collective idea of the South African Intergovernmental Fintech Working Group (IFWG) and the Intergovernmental Crypto Assets Regulatory Working Group.
The former IFWG includes, the Financial Intelligence Centre, the Financial Sector Conduct Authority (FSCA), the National Credit Regulator, the National Treasury, the South African Revenue Service (SARS) and the South African Reserve Bank (SARB). They explained that;
“The purpose of this position paper is to provide specific recommendations for the development of a regulatory framework for crypto assets, including suggestions on the required regulatory changes to be implemented.”
30 Recommendations in Compliance With the FATF Standards:
The position paper outlines 30 recommendations for the regulation of cryptocurrency and initial coin offerings (ICOs). Stakeholders and public comments are welcomed until May 15, 2020.
As a member state of FAFT, the first recommended measure is compliant with the rules set by the FATF as it appears in the guidance for crypto assets and crypto asset service providers (CASPs) published in June 2019.
CASPs include crypto trading platforms, ATMs, token issuers, funds and derivatives service providers, custodial wallets, and other custodial services. The policy paper adds:
“It is recommended that entities providing crypto asset services be regarded as CASPs, taking cognisance of the revised Recommendation 15 of the FATF recommendations on new technologies and virtual assets.
This will include conducting customer identification and verification, conducting customer due diligence, keeping records, monitoring for suspicious and unusual activity on an ongoing basis, reporting to the FIC any suspicious and unusual transactions, reporting cash transactions of R25 000.00 and above.”
The regulators have put forward the Financial Sector Conduct Authority as “the responsible authority for the licensing of ‘services related to the buying and selling of crypto assets’” and “specific conduct standards should be developed for these services.”
The policy paper also notes that “The Financial Surveillance Department of the SARB should assume the supervisory and regulatory responsibility for the monitoring of illegitimate cross-border financial flows in respect of crypto asset services.”
Additionally, The Financial Intelligence Centre (FIC) will be supervising the activities of crypto service providers as the Supervisory Authority.
Every operational CASPs will be required to implement Recommendation 16 (‘the travel rule’) of the FATF recommendations and also must register with the Supervisory Authority as an accountable institution and comply with AML/CFT requirements.
Going further, cryptocurrency activities will continue to be monitored by the Intergovernmental Crypto Assets Regulatory Working Group.
The paper also clarifies that cryptocurrencies will “remain without legal tender status and not be recognised as electronic money” and “not be allowed for the conduct of money settlements in financial market infrastructures.”