In an attempt to reign in the market, a South African financial Panel, IFWG published a paper calling for the development of a clear cut regulatory framework for cryptocurrencies. The paper suggests the enactment of strict crypto regulations to combat money laundering, as well as, spur more investment in the country’s blockchain sector.
Importantly, the group responsible for the study, the Intergovernmental Fintech Working Group (IFWG), consists of some of the most powerful and influential groups in the country. Specifically, the central bank, the treasury, and the country’s financial regulators are all members. Consequently, the group holds incredible sway on the legislative process in the nation.
According to the documentation, South Africa’s cryptocurrency market has reached a point where it can no longer be ignored. Regulators argue that the growth of the digital economy depends on the establishment of a clear-cut crypto regulatory infrastructure that promotes innovation. Most importantly, regulators fear major blockchain firms operating outside the scope of their legislative control in the future.
The Financial Action Task Force (IFWG)
Notably, the study suggests that South Africa research and adopt international cryptocurrency standards. The paper describes FATF as a perfect example of an international attempt to regulate the market. FATF is a set of guidelines detailing how member countries should police their local crypto industry. The paper is an attempt to provide cohesion between countries on the crypto front.
Regulators argue that it will take an international approach to prevent cryptocurrencies from being used as a major money-laundering tool. Already, countries around the globe have expressed concerns about the appearance of unexplained funds in the market. These concerns, coupled with terrorist funding, are the two main concerns regulators seek to address.
IFWG – Cryptocurrencies
The paper also tackles growing concerns regarding cryptocurrencies such as Bitcoin. Not surprisingly, the publishers believe that recognizing cryptocurrencies as legal tender or electronic money would be counter-productive for the financial system. Researchers cite a 2018 decision by central bankers as support for their argument.
Critically, the document calls for more regulations in the blockchain crowdfunding sector. Regulators believe that its important to align these activities to current securities regulations in the country. The paper specifically mentions STOs and ICOs as two main crowdfunding techniques that should fall under securities regulations moving forward.
South Africa Crypto Regulations Expand
It’s not a huge surprise to see why regulators have concerns over the expansion of the crypto market. The country is home to thousands of crypto investors. In fact, South Africa experienced a crypto boom over the last year, with multiple exchanges emerging in the market. Importantly, all of this growth occurred during a hands-off approach to the market. Currently, the only cryptocurrency regulations in place have to do with taxation.
Unfortunately, this lack of clarity results in slowed adoption for a couple of reasons. For one, a lack of clarity in the space leaves potential startups at a major disadvantage compared to other regions. Specifically, South African startups have voiced concerns over the inability to acquire basic banking services. In turn, major institutions are slow to enter the space.
South Africa Blockchain Asperations
This news demonstrates how regulators can no longer ignore the digitization of the market. Especially when you consider that the African Central Bank is involved in multiple blockchain test pilots at the moment. You can expect to see more pressure from regulators as the tokenization race continues.