Reports suggest that the South African Reserve Bank is crafting policies to control how cryptocurrencies are used locally, marking one of the first definitive regulatory actions in the nation's digital currency arena, which has largely operated without strict oversight so far.
Some believe that the lack of clear guidelines has allowed the crypto industry to flourish in South Africa, but this apparent freedom has also led to increased cryptocurrency-related crimes. Recently, a leading bank in the country revealed its decision to close accounts belonging to crypto exchanges.
Regulatory Measures for Cryptocurrency and Financial Restrictions
On Monday, Business Report disclosed that Kuben Naidoo, the deputy governor of South Africa's central bank, briefed reporters about impending regulations aimed at restricting crypto usage. crypto regulations .
These new regulations are designed to prevent digital currency from bypassing currency controls, and Naidoo noted that these rules are expected to be enforced in the early months of 2020.
However, news of these governmental plans has not been well-received among the nation's crypto and blockchain enthusiasts.
A prominent local crypto news hub, SA Crypto, criticized the regulations, labeling them as 'conservative.' According to the group,
“The SARB's decision to tighten cryptocurrency regulations with the intention of imposing stricter capital controls could have extensive and concerning consequences. With the crypto market's valuation standing at $210 billion (R3.07 trillion), the industry is fostering notable economic expansion in countries that embrace progressive regulatory approaches, thanks to the inflow of investment attracted by numerous blockchain and crypto-asset companies worldwide.”
The collective had previously urged SARB to consider forward-thinking regulations for crypto. In light of the new developments, SA Crypto fears these regulations might dampen innovation and investment opportunities in South Africa.
Financial Institutions Begin Tightening Controls on Crypto Transactions
Amidst these forthcoming crypto regulations, an apparent clampdown on the digital currency industry is also underway. One of South Africa's largest banking institutions, the First National Bank, has closed the accounts of several cryptocurrency businesses.
The bank cited the unpredictable nature of digital currencies and the lack of established regulatory frameworks in South Africa as reasons for this action.
South Africans currently face limits on how much money can be transferred abroad. While citizens can transfer R10 million for overseas investment after approval from the South African Revenue Service, only R1 million can be sent without prior declaration, totaling an R11 million cap on international remittances.
With these restrictions, many South Africans have turned to cryptocurrencies for their ability to facilitate unrestricted international transfers.
As reported by Blockonomi By April 2019, interest in cryptocurrencies was on the rise, with South Africans identified as significant crypto holders worldwide, driven by factors like the volatile rand and a lenient regulatory environment.
Nonetheless, the upcoming crypto regulations in 2020 risk stifling the industry's growth, with existing oversight limited to tax laws. drafted in 2018.
Crypto Scams Rife in South Africa
Government advisories often caution investors about engaging with cryptocurrencies due to associated risks. South Africa has witnessed instances where fraudsters swindled naive investors.
In July 2019, victims fell prey to a bitcoin scheme run by the owner of a deceptive South African bitcoin enterprise. burned down The scheme culminated at the alleged mastermind’s residence. Claiming to deliver exaggerated returns in a short span, Sphelele “Sgumza” Mbatha set up a Ponzi operation and allegedly vanished with investor funds, as is common in such cases.
Additionally, in early 2019, the official Twitter account of the South African Cricket Team was hacked to promote a fake bitcoin lottery scam, but the team eventually regained control and purged the deceitful content.
