The IFWG was established in 2018 and is made up of regulators representing different South African regulatory regimes, from financial services and banking regulators such as the Financial Sector Conduct Authority and the South African Reserve Bank, to the South African Revenue Service as the regulator of taxation regulation.
An initial exploration of the South African crypto asset market culminated in the 2019 consultation paper, which provided an overview of the regulatory and market risks and benefits associated with the emerging crypto assets industry. The position paper published in 2020 builds on the observations set out in consultation paper, and has provided the industry with an outline of the potential regulatory framework for the South African crypto assets industry.
The position paper suggests that crypto assets be accommodated within the existing South African regulatory framework, whilst ensuring that sufficient safeguards be implemented. It proposes 30 recommendations to address the key operational, market and consumer risks identified by the regulators as well as to enable South Africa to participate safely in the global crypto assets market.
We set out some of the most pertinent recommendations below.
The position paper is welcomed as it provides greater certainty than the consultation paper around the risks of crypto assets and the regulatory regime which is best suited to house them. Notably, however, the position paper fails to propose recommendations around data protection. It is most unfortunate, as the digital environment in which Casps operate have the potential to inflict some serious infringement to a person's or an organisation's privacy rights.
In addition, although cybercrime is mentioned as a threat to crypto asset trading platforms, and the position paper states that Casps should ensure that they meet the international cybersecurity standards for the safeguarding of crypto assets, the position paper arguably does not go far enough to protect against the growing cybercrime threat which is so prevalent in this fourth industrial revolution.