The South African Reserve Bank has released a consultation paper to regulate cryptocurrencies in the region. However, the government is seemingly introducing banking-like features to the crypto-markets, going against the very ethos of what Bitcoin stands for.
The bank chooses to call cryptocurrencies as crypto “assets” over the former term, deeming the distinction makes it easier for authorities to enforce tax policies and various protection laws dealing with the possession of a digital property.
Published in collaboration with the National Treasury, the SA Revenue Services (Sars), the Financial Sector Conduct Authority (FSCA), and the Financial Intelligence Centre (FIC); the paper acknowledges the significance of cryptocurrencies as an “important fintech innovation.”
The Bankization of Bitcoin
The framework serves to eliminate fraud and help protect investors interested in cryptocurrencies, but importantly, makes it easier to track transactions and levy taxes. Additionally, a policy paper on e-wallets and financial services related to cryptocurrencies is due for a release in Q1 of 2019.
But the move de-anonymizes cryptocurrency transactions in South Africa, bringing Bitcoin closer to the traditional banking framework it hopes to eradicate someday. As per the report, the new laws would ensure exchange and wallet providers trace transactions and are held responsible for their customer’s usage of cryptocurrencies, similar to the role banks play in today’s financial environment.
As an explanation of its tough stance on governing the sector, the paper calls out price volatility, market illiquidity, widespread fraud, and cybercrime attacks as risks associated with the cryptocurrency market.
Fortunately, Bitcoin remains in the working group’s good books. The paper mentions that cryptocurrencies are similar to financial products like securities and bonds, and their trade will stay active in South African markets. However, the group seeks to improve the monitoring of cryptocurrencies and looks to regulate the sector to prevent any untoward incidents.
Regulating Crypto Startups
Amongst the many policies, crypto startups are expected to register with the government to conduct business, with a set of rules being formulated for service providers in the cryptocurrency market. Businesses related to the buying and selling of cryptocurrencies, such as exchanges, wallets, and related software providers, are set to be affected as a result. The paper notes:
“[This] could lead to formal authorization and designation as a registered/licensed provider for crypto-asset services operating in SA.”
Strict anti-money laundering (AML) laws will be levied on cryptocurrency providers, which includes collecting sensitive information like physical addresses and national identification cards in a similar way to what banks do. And if this was not all, businesses will be mandated by law to monitor and report “suspicious transactions in cash” of R25,000 – or $1,824 – and above.