Cryptocurrency regulation coming for South Africa — when to expect it

Cryptocurrency exchange Luno believes regulation for the burgeoning digital asset space is imminent in South Africa.

“Globally, we have seen moves to regulate crypto, and we anticipate the introduction of a clear South African regulatory regime likely by the end of 2022. Regulatory certainty will have a host of positive spin-offs for the crypto sector,” said Marius Reitz, Luno’s GM for Africa.

In the US, where regulation allows for entry into crypto, firms like Fidelity, Goldman Sachs and JP Morgan are entering the crypto market and the world’s first Bitcoin exchange-traded fund (ETF) — Proshare Bitcoin ETF — saw record inflows into the fund.

In anticipation of local regulations in South Africa, Luno said several asset managers are working behind the scenes to craft crypto products and solutions.

Previous attempts to list a Bitcoin ETF on the local stock exchange have not been successful. Luno said the listing of crypto instruments on the JSE would be a watershed moment allowing asset managers to enter crypto.

Regulation will also boost the number of formal partnerships between banks and crypto companies, facilitating greater crypto adoption.

Once regulations are finalised, financial advisors will be able to propose crypto products and services to clients.

Luno said it is partnering with such businesses to ensure that customers can enter crypto investments through their trusted financial advisors.

Crypto crackdown

Luno’s regulatory predictions follow a crackdown from South African regulators in 2021, using the outdated Currency and Exchanges Act of 1933. It was last updated in 1997.

The last time South Africa’s exchange control regulations received a substantial update was in 2012.

While the Intergovernmental Fintech Working Group promised to develop sensible crypto regulations that protects people and fosters innovation, the National Treasury’s Financial Surveillance department inside the South African Reserve Bank took a stance on the following issues:

• Buying crypto assets from offshore exchanges with a credit card is illegal — banks were forced to ban such purchases.
• Transferring crypto assets from your wallet in South Africa to an offshore exchange is a criminal offence.
• Decentralised exchanges are considered offshore.

Last year Standard Bank also sent shockwaves through the South African crypto industry when it served account termination notices on several clients who offer automated cryptocurrency arbitrage services.

Central bank digital currencies

Luno global head of payments Louis van Staden said he expects to see the launch of more central bank digital currencies (CBDCs) in 2022.

“Nigeria has launched the e-Naira, and South Africa is investigating a digital currency. CBDCs are significant because they represent a meeting point between how the technology can be leveraged and a comfortable space for regulators,” he said.

Van Staden said the focus in the payment space is on seamless, fast, and safe ways to buy and sell crypto.

He believes that companies will be investigating ways to incorporate familiar tools like cards and mobile money in the crypto ecosystem.

“Open banking — where financial institutions share information about customers — is already quite prominent in the UK and Europe. It is quick, and information can easily be shared across multiple institutions. Ultimately, systems that make transacting simpler are sure to gain traction.”

Luno also predicted 2022 would be a year of more formal links to the financial services sector and ongoing price volatility for which cryptocurrencies have become known.

In 2021, the crypto market experienced new all-time highs and took some brutal hits.

Luno said a longer-term view shows that the cryptocurrency market will keep its upward trajectory, even with occasional massive price drops.

Now read: SARS tightening tax on Bitcoin