Amid the increasing scams pertaining to digital currency, South Africa is reportedly moving with high urgency to solidify the supervision of cryptocurrency assets.
Kuben Naidoo, CEO of Prudential Authority, South Africa's banking regulator stated that as per a new regulatory timeline, a framework will be finalized in three to six months following the publication of proposals earlier in June. The proposal would require public comment before approval.
Naidoo stated that the authority is trying to put a regulatory framework in place quickly. It is crucial to define this as a financial product and then creating a regulatory framework, he added.
This approach is expected to establish tougher rules this year after a series of shocking scandals which include a recent suspected Ponzi scheme, that led to the disappearance of around USD 3.6 billion in bitcoin.
Cryptocurrency service providers in South African have reportedly been operating uncontrolled by the regulatory authorities even when the popularity of cryptocurrency assets has taken off.
Speaking on the matter, Naidoo mentioned that the regulatory body believes that cryptocurrencies are risky and wants to ensure that the financial sector knows those risks and pricing for those risks.
He further stated that the regulators in South Africa will first formulate the know-your-customer rules for crypto exchanges and develop systems to put the asset class under surveillance to prevent laundering of money out of the country. Post that, guidelines for investor-protection and rules pertaining to capital risk management for the banking sector would come into effect, he added.
Various South African companies providing digital currency services have supposedly been looking for improved rules so that trust can be built in the asset class.
Meanwhile, Marius Reitz, General Manager at Luno-Africa stated that any cases of fraud draw attention to the significance of regulation. It is expected that clear guidelines in South Africa as well as across the globe could result in increased adoption through the improved stability and trust in the market, Reitz added.