South African Reserve Bank (SARB) has drafted a consultation paper on policy proposals for the crypto asset industry on January 16. The paper also recognizes risks such as lack of consumer protection, possible misuse related to money laundering and terror financing.
The draft highlights the risks surrounding crypto assets. It notes a lack of regulatory and legal framework and the absence of consumer protection laws that pose a threat to crypto investors.
The draft stated that the –
“SARB does not supervise or regulate crypto assets view, systems or mediators. Hence, all activities related to the purchase, trading or use of crypto assets are done at the end users’ (customers) independent risk. The SARB will continue to monitor these activities and developments in this area.”
The reserve bank followed an approach to produce policy and regulatory responses to the emergence of crypto assets in South Africa. The Crypto Assets Regulatory Working Group developed a functional approach and identified the following use cases:
- Purchasing or Selling
- Capital raising through initial coin offerings
- Crypto derivatives and funds
- Market provisioning.
The objective of this consultation paper is to:
- Provide an overview of the perceived risks and benefits associated with crypto assets.
- Discuss the available regulatory approaches.
- Present policy proposals to industry participants and stakeholders.
The consultation paper focuses exclusively on non-government or noncentral bank issued crypto assets.
The favored term of ‘crypto assets’ thus encloses and stretches to all these functions and is used throughout this document. The proposed definition states that “Crypto assets are digital representations or tokens that are accessed, verified, transacted, and traded electronically by a community of users. Crypto assets are issued electronically by decentralized entities and have no legal tender status, and consequently are not considered as electronic money either.”
The paper further mentions that crypto assets have the capability to be used for payments and for investment purposes by crypto asset users. Crypto assets have the strength to function as a medium of exchange and unit of account or store value within a community of crypto asset users.
South Africa currently has no intentions of enforcing a ban on buying, selling or even holding of crypto assets. However, the SARB noted that crypto assets are not recognized as a currency; therefore customers may be exposed to harm in an unregulated environment.
Recently Japan had drafted crypto regulations due to hacking incidents. It is certainly a significant initiative by an African nation, which has taken a step in formulating crypto asset industry.
What do you think of the proposed consultation paper by the South African Reserve Bank? Share your thoughts in the comments.