South Africa Considers Crackdown on Anonymous Crypto Assets
The South African Reserve Bank (SARB) would be publishing a policy paper this quarter on how e-wallet and other service providers in the crypto industry would be required to register with the government.
Behind these registrations is the intent to help protect users and investors of cryptocurrencies as well as to make it easier for the authorities to enforce taxes and other laws on crypto assets. Banks don’t consider these assets as currencies so the authorities are having a hard time enforcing laws and levying taxes on them.
These registrations would remove the anonymity from cryptocurrency transactions and would thus make service providers responsible for keeping a track of the various activities holders of such digital tokens do. The concept is much similar to how banks work.
In a consultation paper published this week, the SARB talked about regulation of such tokens under an Intergovernmental FinTech Working Group (or IFGW), including the National Treasury, the SA Revenue Service (Sars), the Financial Sector Conduct Authority (FSCA) and Financial Intelligence Centre (FIC).
IFGW accepts how important these assets are to the fintech industry but is worried about the protection of the investors. Lately, there has been an increase in the volatility, frauds, hacking incidents, and liquidity risks of the industry. This has gotten the investors—and the government—worried.
The group understands that these assets might perform functions similar to those of commodities and securities and indeed doesn’t want South Africa to ban the trade of the assets. However, it lays great emphasis on monitoring this sector as it is quite an unregulated sector as of now.
IFGW proposes a set of regulations which would protect investors while helping the government authorities keep an eye on decentralized digital tokens. These rules include the need for such service providers to register themselves so that they could have the formal authority and designation as licensed and registered crypto asset service providers operating in South Africa.
Crypto asset payment providers such as Luno would also have to register themselves, as would entities providing software that enables storage of such assets. They would have to comply with anti-money laundering (AML) rules. For banks, these rules include identifying customers and knowing their addresses. Such service providers would also have to monitor and report all the transactions that they find suspicious.