The National Treasury plans to further regulate South Africa’s crypto-mining sector and crypto assets in 2022.
In its Budget Review published on Wednesday (23 February), Treasury said it is exploring measures to regulate electricity‐intensive crypto mining, which is environmentally harmful.
It also plans to publish a paper to address risks posed by so‐called ‘stablecoins’. Stablecoins are designed to have a value that is much more fixed than normal cryptocurrencies. This is because they are pegged to other assets, such as the US dollar or gold.
The country’s Intergovernmental Fintech Working Group (IFWG) published a position paper on crypto assets in June 2021, setting out a coordinated and phased approach to regulating crypto assets in the country.
Treasury said regulatory authorities are now developing several interventions based on the recommendations in this paper, including:
Including crypto asset service providers as accountable institutions within the Financial Intelligence Centre Act. This change would address concerns around money laundering and terror risk financing through crypto assets and align the act to the standards set by the FATF for virtual assets and related service providers. The proposed amendments to the act were published in June 2020 for public consultation and are expected to be finalised during 2022.
Protecting consumers by considering the declaration of crypto assets as a financial product under the Financial Advisory and Intermediary Services Act. According to this declaration, any person providing advice or intermediary services related to crypto assets must be recognised as a financial services provider under the act and must comply with the act’s requirements. This will include crypto asset exchanges and platforms, as well as brokers and advisors. This work is expected to be finalised during 2022.
Enhancing monitoring and reporting of crypto asset transactions to comply with the Exchange Control Regulations of 1961. The process to include crypto assets in the regulations is underway.
Treasury said that it will also further explore the digitalisation of South Africa’s financial markets in 2022.
“Following the review of a wholesale digital central bank currency or digital cash, the second phase of this project explores digital financial assets based on distributed ledger technology and the use of digital money to settle payments.
“It highlights the potential impact of this technology and digitalisation on financial markets, and clarifies the relevant operational, legal and policy questions around a potential change.”
The project findings are expected to be released in April 2022, it said.