The National South African Treasury plans to regulate South Africa’s crypto-mining sector and crypto-assets. Amendments to the country’s financial laws are expected to include the proposal of crypto-asset service providers as accountable institutions which will be finalized in 2022.

South Africa is focussing to address the issue of “significant weaknesses in the country’s anti-money-laundering and counter-financing of terrorism systems” by regulating crypto service providers that were identified by the Financial Action Task Force (FATF). The South African Treasury said this crypto asset proposal will be included within Financial Intelligence Centre (FIC) Act. This move will address concerns related to money laundering and terror risk financing through crypto assets. The proposed amendments to the act were published in June 2020 for public consultation and will be finalized by 2022. Treasury proposes amending the FIC Act to align it with the FATF's standards, explaining that public input has been open since June 20, 2022.

Recently the Budget Review published where Treasury disclosed about exploring measures to regulate electricity-intensive crypto mining which is environmentally harmful. The treasury also expects to see crypto assets being declared as financial products under the Financial Advisory and Intermediary Services Act (FAIS). As a result of this declaration, anyone offering advice or intermediary services related to crypto-assets needs to be recognized by the law as a financial service provider. This will include brokers, advisor’s crypto-asset exchanges, and platforms.

“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 digitalization on financial markets, and clarifies the relevant operational, legal and policy questions around a potential change.”

The project findings will be published in April 2022, according to the announcement. Additionally, it plans to publish a paper to address the risks posed by so-called stable coins. A stablecoin is designed to have a value that is more fixed than normal cryptocurrencies. Since they are pegged to other assets, like the dollar or gold, they tend to fluctuate. The Intergovernmental Fintech Working Group (IFWG) issued a crypto asset guidelines document through the Crypto Assets Regulatory Working Group (CAR WG). The paper confirms that crypto assets will be brought into the South African regulatory purview in a phased and structured manner.

Indrani bose

CBW - External Analyst

INDIA