South African Regulators Mandate Registration of Crypto Service Providers

Regulatory bodies of South Africa along with its central bank has recently published a new consultation paper on the crypto industry, earlier this week. The South African Reserve Bank (SARB) along with the Financial Intelligence Centre (FIC), Financial Sector Conduct Authority (FSCA), National Treasury (NT), and South African Revenue Service (SARS) - has stated that the crypto industry should be properly regulated to protect the local investors.

The ongoing cryptocurrency thefts and threats has recently forced global regulators to intervene and protect the investors. However, regulators of the crypto-friendly countries are making it sure to achieve a balance between FinTech innovation and regulatory measures.

As a result, the SARB is cautiously approaching regulations as it knows that any king of mistake might lead to “reputational risks”. While aiming to settle for a middle ground between a blanket ban and doing nothing, the banks calls this as “limited regulation”.

The central bank notes: “At this proposed level, an official body places specific requirements on providers of certain services in respect of crypto assets, without setting predefined conditions for formal authorization to provide crypto assets-related products or services”.

Besides several measures being worked out, the SARB is also considering regulating the crypto sector by introducing the mandatory registration scheme for its local cryptocurrency exchanges and wallet platforms.

“The phased approach, starting with the registration requirement, could lead to formal authorization and designation as a registered/licensed provider for crypto asset services operating in South Africa at a later stage,” SARB stated. Furthermore, the central bank also made it clear that it doesn’t consider digital assets as legal tender.

The regulators have also asked the public and other communities associated with the crypto industry to give their comments by Feb 15. 2019. Based on the type of the comments and the overall mood, the regulators will decide on the severity of regulations.

The central bank is willing to come with a complete registration process by the end of Q1 2019. Registration will be required for all trading platforms, wallet providers, custody service providers,  vending machines (Bitcoin ATMs), and crypto payment service providers.

Furthermore, all the service providers will have to mandatorily comply with the AML/CFT regulations under South Africa’s Financial Intelligence Centre Act. Also, crypto service providers will have to monitor and keep check on the clients. In case of any unusual or suspicious activity, they are required to immediately report the regulators.