Crypto adoption thrives where there is official approval. And a government agency approving the use of digital assets could help boost its expansion.
Financial institutions operating in South Africa and having crypto clients can now offer digital asset services. South Africa’s central bank has approved financial services providers to offer crypto services to their clients.
The Southern African country is one of the few African nations to allow institutions to offer customers digital asset services officially.
Banks to Facilitate Crypto Transactions
According to the new arrangements, banks can serve as a conduit for funds linked to crypto asset service providers (CASP). In addition, banks can facilitate customers’ requests to purchase crypto assets.
Customers, through their banks, can also receive pay-outs in crypto converted to fiat in their bank accounts. The South African Reserve Bank (SARB) also stated that banks that began offering crypto services are at risk if they opt to terminate their work with CASPs.
The SARB noted that this might disrupt the financial integrity of the affected bank. Furthermore, achieving a balanced risk-based approach in the financial sector may dent the process.
The SARB disclosed that banks are free to choose their CASPs but subject to the regulatory guidelines before approval.
South Africa is one of the few countries with a liberal approach to crypto transactions.
South Africa’s view of crypto has changed as one of the top economies in Africa with the surge in decentralized digital assets. The SARB has previously seen the crypto industry as threatening the country’s economic stability. As a result, it has established rules to oversee the South African crypto space.
Given its global significance, the regulator aims to treat crypto assets as financial products. Thus, the central bank’s digital currency (CBDC) pegged to the country’s Rand will be utilized to regulate the sector.
South Africa’s Crypto Laws
According to Kuben Naidoo, the deputy governor of the SARB, the bank is working on introducing new crypto regulations for the country. As the hype about digital currency envelops the world, South Africa is on par with other countries regarding regulations.
Central banks across the world are making efforts to learn more about cryptocurrency. However, South Africa does not intend to regulate virtual assets as a currency. Instead, the view is on regulating it as a financial asset and bringing it into the mainstream. Investor protection is at the core of regulating the industry, added Naidoo.
The SARB will liaise with the Financial Intelligence Agency (FIA) to manage the activities of digital assets as financial products. This ensures that it is not used for money laundering, financing terrorism, or tax evasion.
Furthermore, the SARB plans to include some critical requirements for the traditional banking regulations. The regulator will add exchange control mechanisms to regulate the crypto market and Know Your Customer (KYC).
The aim is to ensure compliance and protect investors. Crypto is too volatile to be used in South Africa for payment.