South Africa’s Financial Regulator has revealed that it plans to unveil key regulations for the trading of cryptocurrencies in the country, early next year. The plan is designed to protect vulnerable and inexperienced traders from highly risky assets.
Financial Sector Conduct Authority(FSCA) Commission Unathi Kamlana said in an interview that these regulations should be available for review and publication in the first half of 2022. While there have been many suggested regulatory frameworks anticipated in South Africa, none have been finalized. This could be the first step toward finalization.
The rules, designed in concert with peers like the prudential authority and the financial surveillance board, will establish how trading in coins such as Ethereum, XRP and Litecoin should be conducted, FSCA Commissioner Unathi Kamlana said.
Other factors to consider are how currencies interact with traditional financial instruments, the dangers they pose to bank balance sheets, and if they pose a threat to fiscal stability.
“What we want to be able to do is to intervene when we think that what is provided to potential customers are products that they don’t understand that are potentially highly risky,” Kamlana said. “We must be very careful to not just legitimize them.”
Regulations were introduced in response to two big crypto frauds that originated in South Africa, both of which resulted in the loss of billions of dollars in investments. Over the last few years, digital currencies have risen from the outskirts of the financial world to the center, prompting more scrutiny around the world to prevent providers from operating unchecked.
While Kamlana believes cryptocurrencies do not yet pose a systemic risk to the financial services sector’s stability, the FSCA views them as an asset rather than a currency. The South African Reserve Bank’s ambitions to build its own stable coin are being monitored by the regulator, who sees this as the most responsible approach to innovation, according to Kamlana.
“I think that if I were to give advice to retail investors, I would say wait to see what comes out of the process of the work of the central bank,” he said. “The best outcome in terms of stable coins is what comes out of central bank innovation, given their reliability and stability.”