South Africa’s financial watchdog, Financial Sector Conduct Authority (FSCA), has classified cryptocurrencies as financial products, under the Financial Adviser and Intermediary Services Act. The FSCA has called crypto assets a digital representation of value that uses distributed ledger technology (DLT). In a published notice signed by Unathi Kamlana, Commissioner of the FSCA, cryptocurrencies have been declared as financial products and their regulation is to begin with immediate effect from the date of publication of the notice. Regulatory plans include enforcing exchange controls and licensing crypto trading companies.
The desire to regulate crypto has been expressed by South African authorities for a few years. About 3 years ago, a group called the Intergovernmental FinTech Working Group (IFWG), made up of South Africa’s central bank, treasury and financial regulators, released a document that called for the development of a clear regulatory framework for cryptocurrencies.
Earlier this year, South African Reserve Bank (SARB) Deputy Governor Kuben Naidoo said that South Africa would seek to introduce a regulatory framework for crypto. It is said that South Africa is also planning to create the Digital rand, its currency issued by the reserve bank, which will be pegged to the South African rand. Currencies issued and regulated by central banks or reserve banks are generally referred to as Central Bank Digital Currencies (CBDC).
Kuben Naidoo, during a PSG Konsult Think Big Webinar in July 2022, said:
“Our perspective has changed and we now view cryptocurrency as a financial asset, and we hope to regulate it as a financial asset”
The FSCA believes that recognizing cryptocurrencies as financial products is the first step towards consumer protection. The FSCA claims that the cryptocurrency industry aggressively markets its products and services without any control over the quality of its products. According to the Chainalysis 2022 Global Crypto Adoption Index, South Africa is 30th in global crypto adoption. It is estimated that around 10% to 13% of South Africans own or trade cryptocurrencies.
In the UK, an amendment proposed in the new Financial Services and Market Bill has been adopted. The bill, comprised of 20 separate measures and over 335 pages, includes cryptocurrency regulatory clauses proposed by MP Andrew Griffith. The House of Commons, the lower house of Parliament, sat on Tuesday, October 25 to hear the bill. Members of the House voted in favor of the bill.
The bill gives the Financial Conduct Authority (FCA) the power to regulate crypto assets according to the regulatory principles of the Financial Services and Markets Act 2000. The Financial Services and Marketplace Bill is already looking to add payment rules to stablecoins. and crypto-related businesses, requiring an FCA registration process and regulating crypto-related activities Ads.
The passage of this bill comes just days after a new Crypto-friendly Prime Minister, Rishi Sunak, was appointed following the resignation of Liz Truss. The UK, as well as the global crypto community, welcomed the news of Sunak’s appointment. Rishi Sunak, while serving as finance minister under Prime Minister Boris Johnson’s administration, expressed a desire to turn the UK into a crypto hub.
Sunak’s appointment as prime minister and passage of the bill to regulate digital assets was seen as a “sequence of events » it will work in favor of cryptocurrencies and their adoption in the UK and around the world.
Cryptocurrencies continue to gain traction among investors and regulators around the world. Its recognition as a new asset class has prompted regulators around the world to explore ways to regulate it. Different governments have taken different approaches in regulating cryptocurrencies; some governments have put in place “tough” rules regarding the possession, transfer and exchange of digital assets; while others have set up special committees to study digital assets and their impact on the general finance and investment landscape. In most cases, governments that were previously “tough” about cryptocurrency-related activities have relaxed some of their legislation and are now looking to regulate this asset class by introducing new legislation.
In the United States, the Department of Justice and the Securities and Exchange Commission (SEC) have been working together on future cryptocurrency regulation to provide consumer protection and more streamlined regulatory oversight. The Biden administration also instituted new rules in the administration’s infrastructure bill in which cryptocurrency exchanges are considered brokers and must comply with relevant AML/CFT record-keeping obligations. In the new law, cryptocurrency exchanges are required to report crypto transactions directly to the IRS; this way, the IRS will be able to tax cryptocurrency traders appropriately.
In compatible with cryptocurrencies climates like Singapore, the rules regarding cryptocurrency trading are lax. Although cryptocurrencies are not yet treated as legal tender in Singapore, crypto exchanges and cryptocurrency trading are legal. The Singapore government has not yet backed or issued cryptocurrency for retail use, but it has collaborated with blockchain companies to explore the use of Distributed Ledger Technology (DLT) for clearing and settlement of payments and securities. Some of them compatible with cryptocurrencies countries are now tighten their lax crypto laws and go to regulation.
Meanwhile, in China, Algeria, Bolivia and some other anti crypto strict restrictions have been maintained regarding the ownership of cryptocurrencies. These governments cite concerns such as money laundering and terrorist financing through the use of cryptocurrency, or simply a blatant distaste for currency that is not issued and regulated by their central bank.
El Salvador became the first country to pass a bill making Bitcoin legal tender in 2021; at the time, the international monetary organizations whose the IMF urged El Salvador to withdraw Bitcoin as legal tender. In April 2022, the Central African Republic became the second country to make Bitcoin its official currency.
Although there is currently a disparity in how different governments deal with cryptocurrencies, the regulatory fabric for cryptocurrencies is being woven. As governments take steps to regulate digital assets and their brokerage, more governments could join in, “reducing” regulatory disparities; then the ownership, transfer and trading of cryptocurrencies will be globally guaranteed by law.