The new rules in a nutshell…
Interventions proposed by the IFWG (Intergovernmental Fintech Working Group) have informed government’s approach to establishing the desired framework, these recommendations are as follows:
- The Financial Intelligence Centre Act (2001) is to be amended to include crypto asset service providers under the scope of accountable institutions. This inclusion directly addresses concerns of money laundering and the use of crypto assets for the funding of terror activities. It further aligns the Act to FATF standards for virtual assets and related service providers. These amendments to the Act are expected to be finalized in 2022.
- Crypto assets will be classified as a financial product in terms of the Financial Advisory and Intermediary Services Act (2002). This inclusion will ensure that any individual offering advice or intermediary services pertaining to crypto assets, must be recognized as a financial services provider under the Act and meet all requirements thereof. Crypto asset exchanges, advisors and brokers will be impacted by this development, expected to be finalized in 2022.
- The Exchange Control Regulations of 1961 is already being amended to include crypto asset transactions.
The first and second amendments above are designed to protect businesses and individuals trading in cryptocurrencies, from unscrupulous advisors and traders. Advisors and traders will be required to register with the Financial Sector Conduct Authority (FSCA) and comply with their requirements.
The third and final amendment is designed for companies and individuals that represent investors, and then subsequently disappear with investor funds. SARB is getting granular on increased monitoring of crypto transfers between South African and international exchanges.
What is important to note is that SA cryptocurrency owners have a R1m discretionary allowance per financial year, for the movement of funds, including crypto, abroad without needing SARB approval. This amendment is aimed at individuals sending more than this threshold without obtaining the necessary SARB approvals.
The cryptocurrency regulatory landscape in South Africa is very much in its infancy, which has made it ripe for attack from unscrupulous crypto traders that have disappeared from the country with investor funds. Without protection and rights of recourse, investors are exposed. Whereas other perhaps more traditional financial products are regulated, the comparative youth of cryptocurrencies render it ripe for rogue traders. Investors easily drawn in by promises of extraordinary returns have found themselves out of pocket, losing everything that has been invested and it’s to protect these investors, that government is stepping in.
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