Persistent market interest in crypto assets has made South African regulators reconsider how they categorize digital assets. The decision is a reversal of the predominantly hands-off approach adopted for the last seven years and has been determined by increasingly high levels of retail interest in cryptocurrency in the country.
In a paper published on Friday, the country’s Intergovernmental Fintech Working Group (IFWG) came up with a standard procedure for introducing a regulatory framework that will focus on crypto asset service providers. The announcers have emphasized that a few things, including the South African crypto market’s soar to more than 2 billion rands ($147 million) in a daily traded value earlier this year, have made this former regulation unsustainable. IFWG’s new report notes that although a structured regulatory framework is set to be taken step by step, digital assets remain ‘inherently risky and volatile.’ Also, it pointed out that the future financial losses sustained by crypto trading activities remain high.
Six overcoming principles will notify the country’s evolving approach. These include taking an ‘activities-based perspective’ that will guarantee that a preposition of ‘same activity, same risk’ impacts regulator’s decisions, adopting measures relative to risk, and taking a collaborative approach to digital asset regulation. Besides, it also mentioned staying updated with international best practices and supporting digital financial education.
The report also mentions 25 recommendations for how to regulate digital assets in relation to three primary areas of concern: anti-money laundering and combating the financing of terrorism, cross-border financial regulations, and the application of financial sector rules. Besides the paper, IFGW released a bulletin showcasing its strategy, which mentioned the concerns about the nature of the asset class and surrounding environment. The group pointed decentralization aspect of the crypto space as a downside and mentioned the manipulative nature of some crypto marketing materials, price volatility, and scam activities, such as Ponzi schemes.