South Africa: Central Bank will create body to regulate cryptocurrencies

According to information provided by the Finextra portal, the Reserve Bank of South Africa (SARB) is establishing a self-regulatory organization to control cryptocurrencies and Fintech developments in the country.

Currently, the SARB does not supervise or regulate cryptoactives, but, in order to guarantee the protection of investors and prevent risks, it has opted to establish a research unit to monitor progress in the industry.

Bridget King, director of banking practices of the entity, said that the self-regulatory organization (SRO) would be a non-state agency authorized to establish its own rules, directives and standards. It will take measures to prevent systemic risk while allowing South Africa's burgeoning encryption industry to remain competitive globally. In this regard, King stated:

Regulating cryptocurrencies prematurely could have the negative consequence of slowing growth and industry innovation. In addition, if the laws are written based on the existing technology, which is still in its growth phase, there is a risk that this technology has moved both at the time of enacting the legislation, that the legislation is obsolete or requires an almost immediate update so you can align with it.

The research unit, called Proyecto Khoka, will begin by examining the use of DLT (distributed accounting technology) as a method to process secure electronic payments. To this end, the bank is launching a proof of concept (PoC) to replicate interbank clearing and settlement using Quorum, a system based on the Ethereum Blockchain. In this regard, the Central Bank said:

The objective of this project is to obtain a practical understanding of the DLT through the development of a PoC in collaboration with the banking industry. The objective of the PoC, in turn, is to replicate the interbank settlement in a DLT that will allow the SARB and the industry to jointly evaluate the potential benefits and risks of the DLT.

In December last year, the South African Revenue Services (SARS) announced that they would explore methods to track digital currency exchanges in order to prosecute tax evasion.

Also, in January 2018, the SARB announced the establishment of a Fintech working group that will review the bank's position on private cryptocurrencies and address regulatory issues, including liquidation risks, monetary policy, trade control implications and stability. financial