- Intergovernmental Fintech Working Group, a South African financial watchdog, will roll out plans to regulate cryptocurrencies in the country.
- IFWG raised concerns about decentralized platforms that have no centralized intermediary in its position paper.
- Luno, a popular crypto exchange in Africa, has 2.1 million customers in South Africa.
The crypto industry has witnessed immense growth in recent times, mainly due to mainstream attention and adoption. Moreover, the arrival of institutional investors into the ecosystem propelled the crypto space to the next level. Yet some nations exist which are very skeptical about virtual currencies, and hence regulations have been non-existent in these countries. That is about to change in one of the leading economies in Africa.
In a recent update, the South African financial watchdog Intergovernmental Fintech Working Group(IFWG) has rolled out its plan to regulate cryptocurrencies. The authorities have also rolled out the Position Paper in this regard. The paper mentions the structured approach and roadmap to regulate the crypto assets in South Africa.
The position paper mentions the IFWG recommendations and its structured approach to regulating crypto assets. The recommendations include imposing Anti-Money Laundering(AML) rules, combating the financing for terrorist activities, cross-border financial flow restrictions, and consumer protection laws. Moreover, the regulators are poised to keep a close watch on the service providers to prevent illegal market practices.
The IFWG also raised concerns over the volatility in the crypto space and the ongoing manipulations within the ecosystem. The decentralized nature without any central intermediary was also addressed. Hence, it clearly states that regulating the crypto assets does not mean that the government endorses cryptocurrencies rather the decision aims to promote innovation.
What Made South Africa To Rethink On Cryptocurrencies?
It is a fact that cryptocurrencies gained mainstream recognition in the year 2020, which may be due to the uncertainty over the traditional financial system. The crypto user base kept growing at a greater pace globally. In fact, the growing market enabled one of the popular crypto servicer providers of South Africa, Luno reach a milestone of 7 million users globally in April 2021.
Moreover, out of these 7 million users worldwide, 2.1 million users reside in South Africa. According to a survey conducted by Luno, 54% of the participants were ready to adopt a single global digital currency.
Adding to the substance, many other popular crypto services providers, including Luno relocated their headquarters to South Africa. The reason behind the shift was the diminished pace of the African authorities to regulate cryptocurrencies.
Moreover, the developments going on across the globe relating to cryptocurrencies may also have given a greater push for the African regulators to do so. However, cryptocurrencies, if regulated accurately, may also fuel the country’s economy. These all the points must have compelled South Africa to roll out its revised policies on cryptocurrencies. After all, according to the 2014 policy position, the crypto assets were largely unregulated in South Africa.