South Africa’s regulatory clock after crypto scams
(Bloomberg) – South Africa is increasingly focused on strengthening oversight of cryptocurrency assets after a proliferation of scams.
A new regulatory timetable plans to finalize a framework in three to six months, after the publication of proposals earlier in June that require public comment before approval, according to Kuben Naidoo, chief executive of the South African banking regulator known as Prudential Authority.
“We are trying to put the regulatory framework in place quickly,” said Naidoo, who is also deputy governor of South Africa’s central bank. “Our view is that crypto is a financial product and should be regulated as a financial product.”
The approach that is taking shape means that tougher rules could be imminent this year after a wave of scandals that most recently included a hint of a Ponzi scheme, which resulted in the demise of around $ 3.6 billion in Bitcoin.
“Now we define this as a financial product and if there are any scams where the public is duped, given incorrect or bogus information, it is definitely a market conduct issue that should be taken seriously,” he said. declared Naidoo.
South African cryptocurrency service providers are operating unchecked by regulatory powers even as the popularity of the asset class has taken off. Last year, the collapse of Johannesburg-based Mirror Trading International was called the biggest crypto-related scam of 2020 by blockchain data platform Chainalysis.
“We believe that cryptocurrencies are risky and we want to make sure that the financial industry is properly aware of these risks and the pricing of those risks,” Naidoo said.
Africa’s most developed economy is tightening the screws on industry as digital currencies move from the periphery of the financial world to the mainstream and come under greater scrutiny around the world.
In one of the most significant moves to date by a regulator amid a global crackdown, Binance Markets Ltd. was banned on Sunday by the UK financial watchdog from carrying out any regulated activity in the country. Huobi, one of the most popular cryptocurrency platforms in China, said on Monday that users in the country were banned from trading derivatives.
As part of global regulators’ plans to ward off threats to financial stability from the volatile market, banks will face the most stringent capital requirements for holdings in Bitcoin. Earlier this month, the Basel Committee on Banking Supervision proposed that a 1,250% risk weight be applied to a bank’s exposure to Bitcoin and certain other cryptocurrencies.
South African regulators will first establish know-your-customer rules for crypto exchanges and create asset-class monitoring systems to prevent money laundering outside the country, Naidoo said. Subsequently, investor protection guidelines and capital risk management rules in the banking sector are expected to come into force.
Read more: Crypto Havens lures companies fleeing fear of South African regulators
Companies offering digital currency services in South Africa wanted better rules to take shape and build confidence in the asset class.
“Any incident of fraud draws attention to the importance of regulation and we hope that the clear guidelines in South Africa – and around the world – could lead to wider adoption by building stability and confidence in the market. “said Marius Reitz, Africa Managing Director for Luno.
“The regulation will also raise standards and barriers to entry and eliminate bad actors or service providers with low consideration and a low capacity to protect customer information and money,” Reitz said.
(Updates with Naidoo’s comment in the fifth paragraph)
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