The Intergovernmental Fintech Working Group (IFWG) has published a position paper on crypto assets. In 2014, the National Treasury issued a cautionary note, warning the public about the risks associated with the use of crypto assets for the purpose of transacting or investing. Its position then was that crypto assets were largely unregulated in South Africa, and that parties engaging in crypto related activities did so at their own risk and without any regulatory recourse.
Pam Saxby of Legalbrief Today notes:
Regulating crypto asset service providers will be the first step in a ‘phased’, ‘structured’ approach to bringing crypto assets within SA’s regulatory purview, according to a position paper released on Friday with a document responding to frequently asked questions on the subject. Prepared by SA’s inter-governmental fintech working group and informed by the requirements of various international standard-setting bodies, the paper outlines a framework for addressing the ‘most pertinent and immediate risks’ associated with crypto assets. In the context of broader financial services consumer protection legislation, these are identified as money laundering, terrorism financing and cross-border financial flows.
Against that backdrop, the paper’s purpose is to initiate a process in terms of which each financial sector regulator is expected to implement recommendations specific to the crypto asset use cases falling within its jurisdiction – within short, medium and longer-term timeframes ranging from 12 to 24 months. This is nevertheless noting that, ‘given the evolutionary nature of the subject matter’, the position paper is likely to be ‘continually’ refined with the aim of developing ‘mitigating measures’ for each emerging new risk. An accompanying media statement cautions against interpreting the paper as an endorsement of crypto assets by government or the regulatory authorities concerned.
The IFWG further articulates the following six high-level principles that will continue to guide the national approach to regulating crypto assets in South Africa:
Principle 1: Crypto assets must be regulated appropriately.
Principle 2: An activities-based perspective must be maintained, and the principle of ‘same activity, same risk, same regulations’ must continue to apply and inform the regulatory approach.
Principle 3: Proportionate regulations that are commensurate with the risks posed must apply (i.e. a risked-based approach to crypto asset regulation must apply).
Principle 4: A truly collaborative and joint approach to crypto asset regulation by the IFWG must be maintained.
Principle 5: The dynamic development of the crypto market must continue to be proactively monitored, including maintaining knowledge on emerging international best practices (through standard-setting bodies, etc.).
Principle 6: Digital literacy and digital financial literacy levels must be increased amongst consumers and potential consumers of crypto assets.
Click here to download the IFWG media release published on 11 June 2021 for more detailed information about the above.
Click here to download the FAQ’s published by the IFWG on crypto assets.