South Africa’s Central Bank Proposes Rules for Crypto Companies
Crypto exchanges and wallet providers would have to register with
regulators under rules proposed by South Africa’s central bank.
In a consultation paper published
Wednesday, the South African Reserve Bank (SARB) said that regulatory
action on crypto assets needs to be prioritized to protect consumers and
investors, stating that consumers “are left vulnerable as sellers of
crypto assets are not regulated.”
Discussing the possible regulatory approaches that could be taken,
and citing the “reputational risk” that is faced if mistakes are made,
the central bank proposes walking a middle line between doing nothing
and stringent regulation or a ban – a level of oversight it describes as
“limited regulation.”
“At this proposed level, an official body places specific
requirements on providers of certain services in respect of crypto
assets, without setting predefined conditions for formal authorisation
to provide crypto assets-related products or services,” SARB says.
As such, the bank suggests that a “useful starting point” for
regulating the space would be the introduction of a registration scheme
for crypto asset service providers such as exchanges and wallet
providers.
It would follow that with a review of existing rules and how they can
be applied to crypto assets, with possible amendments or new rules to
follow, and finally a review of the regulatory actions implemented at
that point.
“The phased approach, starting with the registration requirement,
could lead to formal authorization and designation as a
registered/licensed provider for crypto asset services operating in
South Africa at a later stage,” SARB states.
The central bank also recommended that crypto assets should remain
without legal tender status and should not be recognized as electronic
money in its proposal.
A detailed process for registration is expected to be issued and
implemented by the first quarter of 2019. Registered crypto entities
would also need to report suspicious and unusual cash transactions of
25,000 South African rand (or $1,820) and above, according to the
proposed rules.
The central bank’s consultation paper is a joint effort with the
Intergovernmental Fintech Working Group (IFWG), consisting of several
South African regulatory authorities, and is open for public comment
until Feb. 15.
Back in April, the South African Revenue Service, the country’s tax agency, said
that normal tax rules are applicable to crypto earnings – that is, they
may be treated under standard income tax rules, but may be liable for
capital gains tax in some cases.
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