Indian Central Bank: Developing Global Crypto Regulation Is a Priority for G20 Under India’s Presidency

Indian Central Bank: Developing Global Crypto Regulation Is a Priority for G20 Under India's PresidencyThe Reserve Bank of India (RBI) says one of the priorities for the G20 under India’s presidency is to “develop a framework for global regulation, including the possibility of prohibition, of unbacked crypto assets, stablecoins, and defi.” The Indian central bank warned that “turmoil in crypto assets market” is among “the major risks that can […]
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latam monetary integration USANA proposal for relaunching the currently defunct USAN, the Union of South American Nations, profiles a future monetary integration amongst the countries of the organization. The proposal, made by several former presidents of countries in Latam, reinforces the need for regional integration to overcome common problems in the area, including poverty. USAN Relaunch Proposal Includes […]
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South African crypto landscape primed for TradFi growth after FSCA ruling

Industry insiders believe South Africa’s move to classify cryptocurrencies as financial products could drive the adoption and legitimacy of the sector.

South African financial service providers have been primed to offer cryptocurrency products and services to customers after regulatory amendments in the country.

This comes after South Africa’s Financial Sector Conduct Authority amended its financial advisory act from 2002 on Oct. 19, defining crypto assets in the country as financial products. Most importantly, the definition means that cryptocurrencies can now be offered by financial service providers, both domestic or international, given that they are licensed in South Africa.

South Africa already commands a growing number of retail cryptocurrency users estimated to include as many as six million individuals. The country’s Reserve Bank has also taken a measured approach in its regulatory stance of the sector in an effort to ensure investor protection without hampering innovation.

Cointelegraph touched base with two prominent cryptocurrency exchanges in the country, with both Luno and VALR serving significant user bases in South Africa. The companies are well placed to offer insights into the latest regulatory move, given that they cater to both retail and institutional clients in the country.

VALR CEO Farzam Ehsani labeled the FSCA’s move as ‘good news for South Africa setting a path towards regulating crypto asset service providers in the country’ while ensuring ‘they are serving the public with integrity.’ 

Marius Reitz, Luno general manager for Africa, echoed these sentiments by highlighting the importance of regulatory clarity not only for investors but for financial service providers in the country:

“The licensing requirements that will flow from this classification will drive high standards in the industry, particularly in relation to consumer protection, with potential investors easily able to identify those providers that satisfy regulatory requirements.”

Reitz also flagged the key benefit, which now allows financial advisors to formally advise clients on cryptocurrency investments. Before the FSCA amended the definition of crypto assets, financial advisors were not permitted to give advice on unregulated investment opportunities.

“The regulatory framework paves the way for wider institutional adoption. How this plays out will depend on the ability of more traditional finance companies and even banks to be able to fully support this newly classified financial product.”

Chris Becker, cyber banking managing executive at Tyme Bank, also provided insights to Cointelegraph. The South African digital bank welcomed the move to regulate cryptocurrencies within existing frameworks as it looks to drive digital money services and payments.

Becker believes the move could bring some comfort to individuals that may have been cautious of interacting with crypto asset service providers due to concerns of a lack of regulation, having worked for private wealth manager Investec as its blockchain lead in his previous role.

Becker also agreed that the regulatory move may support greater adoption in the long-term if financial service providers use the new product category to offer crypto asset products to their large customer bases.

Nevertheless, regulatory uncertainty has not stopped corporates and institutions from gaining exposure to cryptocurrencies in South Africa. Both exchanges already work with a number of institutional clients.

VALR serves more than 700 corporates and institutions, which includes a number of large traditional finance institutions in South Africa. Ehsani said the firm has been focused on building its infrastructure for the past five years to bridge traditional finance in the country to cryptocurrency markets. Luno also allows corporate customers to use its platform.

Meanwhile Becker highlighted the reality that traditional financial service providers may not necessarily invest in cryptocurrencies as a result:

“Other regulations such as the Pension Funds Act and the Foreign Exchange Control Act do not yet make provision for crypto assets yet.”

VALR’s CEO also believes that the country could see cryptocurrency-related exchange-traded funds (ETFs) and similar financial products being developed and released in the next few months now that regulatory oversight is becoming clear:

“I think we’ll start seeing many more financial products related to crypto in the near future. Many people have been working on this for some time and now with the Declaration, we should expect to see much of this work become visible to the public.”

Reitz offered a more measured take on the subject, highlighting the FSCA announcement as a first step in creating a broad regulatory framework for crypto assets in South Africa. He believes more clarity is needed around the wider application of the regulation with regard to permitted cryptocurrency financial products, highlighting America’s standpoint as an example:

“In the United States, Bitcoin ETFs can only hold BTC futures contracts or stocks of companies and other ETFs with exposure to cryptocurrencies as the SEC continues to evaluate the approval of ETFs that own BTC directly.”

Meanwhile, the FSCA delivered a more sobering message in a press conference that accompanied the Oct. 19 announcement. As Reuters initially reported, FSCA Regulatory Frameworks Department head Eugene Du Toit made it clear that cryptocurrencies are not recognized as legal tender in South Africa.

The regulator also stressed the importance of being able to grapple with scams and fraudulent activities in the space in an effort to protect local investors.

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Report: BTC Mining Investment Platform Declared Pyramid Scheme by South African Consumer Watchdog

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South Africa Recognizes Cryptocurrencies as Financial Products

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South Africa’s Financial Sector Conduct Authority (FSCA) has declared crypto assets as “financial products”, setting up the pace for the inclusion of the asset class under the country’s regulatory purview. According to General Notice published Wednesday, the authority acknowledged crypto assets as a digital representation of value that uses distributed ledger technology. Further, it noted […]

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South Africa declares crypto to be a financial product subject to financial services law

The declaration marks the beginning of the long-awaited process of regulating crypto assets, which will produce benefits such as consumer protection and AML/KYC compliance.

The Financial Sector Conduct Authority (FSCA), South Africa’s financial regulator, published a notice on Oct. 19 indicating that the country’s 2002 Financial Advisory and Financial Intermediary Services Act (FAIS) has been updated to include a definition of crypto assets. A decision of this type has been expected for several months, and it brings crypto assets under regulation in South Africa for the first time.

The FSCA notice, which went into force on publication in the Green Gazette (the government gazette of record), states that a crypto asset is “a digital representation of value” that can be electronically traded, transferred and stored but is not issued by a central bank. Additionally, it “applies cryptographic techniques” and uses distributed ledger technology. The notice goes on to state that crypto assets are declared financial products.

Under the FAIS, a financial product is defined as a security, debenture, “any money-making instrument” or an instrument conferring rights to securities and instruments. It can be offered by financial service providers, whether they are domestic or international firms, that are licensed in South Africa. Registration can be “an onerous procedure,” according to the local press.

Related: On Freedom Day, Bitcoin gives South Africans a stake in their financial future

A South African draft declaration on crypto assets was published in November 2020. In June 2021, a national working group created a roadmap for a regulatory framework. Regulation will help the country conform to Anti-Money Laundering/Know Your Customer (AML/KYC) standards and protect investors, but the details of the AML/KYC requirements have aroused some controversy. In February 2022, South Africa’s National Treasury confirmed the intention of declaring cryptocurrency a financial product and of enhancing the monitoring and compliance of transactions with regard to crypto.

According to the Chainalysis 2022 Global Crypto Adoption Index, published in September, South Africa ranks 30th worldwide for cryptocurrency adoption. Various estimates say that about 10-13% of the South African population are crypto holders.

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South African Reserve Bank encourages friendly behavior with crypto

South African Reserve Bank encourages friendly behavior with crypto

The banking authority said avoiding risk through cutting off crypto-involved clients may pose a “threat” to financial integrity.

The Prudential Authority of the Reserve Bank of South Africa sent out guidelines in effort to prevent illicit activities to its subsidiaries, which included encouragement not to cut off all ties with cryptocurrency. 

It suggested that such an act could cause greater risk in the long run.

The official notice was signed by the Prudential Authority CEO, Fundi Tshazibana. In the past certain South African banks cut ties with what is called in the document, “Crypto Asset Service Providers” (CASP), due to unclear regulations or a high risk factor.

However the notice highlights that risk assessment doesn’t mean dropping crypto entirely:

“Risk assessment does not necessarily imply that institutions should seek to avoid risk entirely (also referred to as de-risking), for example, through wholesale termination of client relationships which may include CASPs.”

It goes on to say such a move could even be a “threat” to general financial integrity, as it may limit the possibilities of treating issues such as money laundering.

In late July the Reserve Bank released an assessment of risks within the local banking sector. According to the report, included in the top 10 threats identified by top local banks were cryptocurrencies and virtual assets.

Related: European Central Bank addresses guidance on licensing of digital assets

Prior to the report, the South African government released a plan which entailed the classification of crypto as a financial asset for regulatory purposes. The laws pertaining to the classification are expected over the next 12-months.

Crypto exchanges in South Africa reacted positively to this announcement. Many believe this move will drive adoption in the country. Already the country has major signs of interest and innovation in the crypto community including IRL crypto use cases.

South Africa is home to crypto projects such as Bitcoin Ekasi, a township which introduced Bitcoin as a means of bolstering financial independence to local underserved communities, and Unravel Surf Travel, a South African-based travel pro-crypto travel company. 

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