The South African Reserve Bank (SARB), the leading monetary authority in South Africa, is on track to introduce policies aimed at controlling the local use of cryptocurrencies. If implemented, this would represent the first solid regulatory effort in the largely unregulated South African crypto landscape.
Though the lack of strict regulations has been seen as a boon for crypto growth in South Africa, the country has been rife with virtual currency-related offenses. One noticeable move was by a top bank, which opted to close accounts associated with cryptocurrency exchanges.
Cryptocurrency Regulations and Currency Control Initiatives
As reported by Business Report on Monday, Kuben Naidoo, the deputy governor of South Africa’s central bank, recently briefed the press about impending regulations aimed at tightening crypto regulations .
New guidelines are being crafted to prevent digital currencies from bypassing government currency control measures. Naidoo mentioned that these new measures are slated to be enforced in the first quarter of 2020.
News of these potential government restrictions has stirred controversy within the country's crypto and blockchain circles.
SA Crypto, a prominent entity within South Africa's crypto community and media, voiced its concerns about the recent regulatory developments, labeling the approach as ‘traditionalist.’ As per the group's commentary:
The repercussions of SARB imposing tighter controls on cryptocurrency, driven by stricter capital regulations, are significant and troubling. With the crypto market cap standing at $210 billion (R3.07 trillion), countries adopting forward-thinking policies are witnessing notable economic growth prompted by the attraction of investments from blockchain and crypto entities worldwide.
Earlier, SA Crypto expressed the need for the SARB to consider forward-thinking regulatory frameworks for cryptocurrencies. With these new directives, the group fears a potential negative impact on South Africa’s innovative and investment landscape.
Banks Start Taking Steps Against Cryptocurrency Exchanges
Despite imminent crypto regulations by the central bank, a crackdown on digital currencies is already underway. First National Bank (FNB), one of South Africa’s leading financial institutions, has shut down the accounts of various crypto companies.
The bank justified its decision by citing the inherent risks associated with cryptocurrencies and the lack of comprehensive regulatory framework governing them in South Africa.
Currently, South Africans are subjected to a limit on outward remittances. They can transfer R10 million for overseas investments, provided they have registered with the South African Revenue Service, and R1 million without declaration, totaling a permissible R11 million sent abroad.
Due to these restrictions, there has been a notable uptick in the use of cryptocurrencies among South Africans, as they offer a flexible means to transfer money globally without the usual limits.
As reported by Blockonomi By April 2019, South Africa was witnessing a significant rise in cryptocurrency usage, with its citizens ranked among the top global crypto owners. Factors such as currency volatility and lax regulation have facilitated crypto's popularity.
However, with the anticipated crypto regulations in 2020, there's a looming threat to the bullish trajectory of the digital currency market in South Africa. Presently, tax legislation remains the sole regulatory touchpoint for cryptocurrencies in the country. drafted in 2018.
Crypto Scams Rife in South Africa
Government officials and financial watchdogs regularly advise against investing in cryptocurrency schemes, warning of their high-risk nature. In South Africa, there have been numerous incidents of individuals falling victim to fraudulent schemes involving virtual currencies.
In July 2019, victims fell prey to a bitcoin scam spearheaded by a deceptive South African bitcoin enterprise. burned down The man's residence was at the heart of the fraudulent operation led by Sphelele 'Sgumza' Mbatha, who orchestrated a Ponzi scheme luring investors with the promise of impressive returns within 15 business days. True to the pattern of such scams, the organizer allegedly vanished with clients' funds.
In the early months of 2019, the South African national cricket team disclosed a cyber-attack on its official Twitter handle, which hackers used to promote a fake bitcoin lottery. Nevertheless, the team regained control of its account and purged the deceitful posts.
