Early next year, South Africa’s financial authority plans to unveil a regulatory framework for cryptocurrencies. This move comes after individuals lost billions from crypto scams.
This was disclosed by Unathi Kamlana, Commissioner of the Financial Sector Conduct Authority (FSCA) to Bloomberg.
The guidelines, which were developed in collaboration with peers such as the prudential authority and the financial surveillance board, will govern how Ethereum, XRP, and Litecoin trading should be performed.
Backstory
Regulations were introduced in response to two big crypto frauds that originated in South Africa, both of which resulted in the disappearance of billions of dollars in investments.
The Cajee brothers ran a cryptocurrency investment platform from South Africa that the local regulator suspects of being a Ponzi scheme. Ameer and Raees Cajee, who have been running Africrypt in Johannesburg since 2019, appear to have vanished, along with an estimated $3.6 billion in Bitcoin.
Over the last few years, digital currencies have risen from the outskirts of the financial world to the centre, prompting more scrutiny around the world to prevent providers from operating unchecked.
The guideline would also take into account how currencies interact with traditional financial products, the risks they represent to bank balance sheets, and whether or not they pose a threat to fiscal stability.
What they are saying
According to Unathi Kamlana, the new framework would decide how cryptocurrencies like bitcoin (BTC) should be traded. During the interview, Kamlana implied that his firm was not keen on approving high-risk products.
He said, “What we want to be able to do is to intervene when we think that what is provided to potential customers are products that they don’t understand that are potentially highly risky, We must be very careful to not just legitimize them.”
While Kamlana believes cryptocurrencies do not yet pose a systemic risk to the financial services sector’s stability, the FSCA views them as an asset rather than a currency.
The South African Reserve Bank’s ambitions to build its own stable coin are being monitored by the regulator, who sees this as the most responsible approach to innovation, according to Kamlana.
“I think that if I were to give advice to retail investors, I would say wait to see what comes out of the process of the work of the central bank,” he said. “The best outcome in terms of stable coins is what comes out of central bank innovation, given their reliability and stability.”