Overview of Regulations Governing Crypto Assets in South Africa
• Regulations governing tokenized deposits and crypto assets are likely to become effective on Jan. 1, 2025.
• The South African Reserve Bank has conducted experiments such as Project Khokha and Project Khokha 2 to understand the risks associated with distributed ledger technology (DLT).
• The SARB is currently exploring the feasibility of a retail central bank digital currency (CBDC), which could potentially increase participation in the formal financial system and reduce opportunities for tax evasion.
Regulations Governing Tokenized Deposits and Crypto Assets
Regulations governing tokenized deposits and crypto assets are expected to take effect on Jan.1, 2025 in South Africa, according to Gerhard van Deventer, a senior fintech analyst at the South African Reserve Bank (SARB). Even though this step is seen as an important milestone, regulators still need to understand or learn the risks that come with using distributed ledger technology (DLT). To achieve this, the SARB and its partners have conducted experiments such as Project Khokha and Project Khokha 2 whose objective was to identify both the risks and benefits of DLT.
Exploring Feasibility of Retail Central Bank Digital Currency
The South African central bank is also examining a general-purpose retail central bank digital currency (CBDC) which could potentially increase participation in the formal financial system as well as reduce opportunities for tax evasion. According Sim Tshabalala, chief executive (CE) of Standard Bank, CBDCs can facilitate secure interbank clearing during transactions. As part of their way forward project on CBDCs, SARB is currently assessing their desirability and appropriateness for South Africa.
Risks Associated with Cryptocurrency Use
Although taking steps towards introducing regulations around cryptocurrency use may be necessary for its regulation in South Africa, regulators are still working on understanding various risks associated with it. Currently, both the SARB and Financial Sector Conduct Authority (FSCA) as well as other stakeholders within the financial industry have yet to identify these risks as well as devise ways to properly manage them.
In conclusion, although regulations governing tokenized deposits and crypto assets are set to take effect in January 2025; regulators still need more time before they can implement them effectively by understanding all associated risks with cryptocurrency use. In addition to this, they are also exploring options such as retail CBDCs that could help increase participation among users within the formal financial system while reducing possibilities for tax evasion.