The South African Reserve Bank (SARB), the country’s apex bank, is reportedly planning to enact policies aimed at restricted local crypto usage. Such a move would signal the first concrete step towards policing the South African virtual currency scene which has so far seen little in the way of crypto regulations.
While some commentators say the absence of clear-cut regulations has allowed crypto to thrive in the country, South Africa has witnessed a litany of virtual currency-related crimes. Recently, one of the country’s major banks announced its decision to shut down accounts owned by cryptocurrency exchanges.
Crypto Regulations and Capital Control Measures
According to Business Report on Monday, the deputy governor of South African’s central bank, Kuben Naidoo recently informed journalists about plans to roll out crypto regulations.
The new regulation seeks to restrict the use of digital currencies to circumvent currency control. Naidoo added that these set of rules would be implemented in the first quarter of 2020.
However, the news of such plans from the government did not go down well with members of the crypto and blockchain community in the country.
SA Crypto, a major crypto community and news outlet in the country, reacted to the news, calling the new regulation “conservative”. According to the group’s statement:
“The implications of the Sarb clamping down on cryptocurrency use for the purpose of stricter capital controls are far-reaching and alarming. With a market cap of $210 billion (R3.07 trillion) in the cryptocurrency market alone, the industry is driving significant economic growth in countries adopting such progressive regulation, due to the investment many blockchain and crypto-asset companies are attracting worldwide.”
The group earlier requested that SARB should look into progressive regulations for cryptocurrencies. With this latest development, SA Crypto believes that the new laws could adversely affect innovation and investment in South Africa.
Banks Already Cracking Down on Crypto Exchanges
While the country’s central bank is set to release new crypto regulations, it appears that there is an ongoing crackdown on the virtual currency sector. One of South Africa’s biggest banks, the First National Bank (FNB) shut down banking accounts of firms of crypto firms.
According to the bank, the action was necessary citing the risky nature of digital currencies, coupled with the absence of robust regulatory laws for cryptocurrency in the country.
Currently, South African citizens have a limit on the amount of money that can be sent abroad. Citizens are allowed to send R10 million for investment outside South Africans if they have applied to the South African Revenue Service and can send only R1 million without a declaration. Which means that citizens can send a sum total of R11 million outside South Africa.
With this limitation, there has been a surge in crypto adoption by South Africans, as they can use virtual currencies to send money anywhere in the world because of its non-restrictive nature.
As reported by Blockonomi back in April 2019, crypto adoption in the country was on the rise with South Africans regarded as the highest owners of crypto globally. Some of the factors that encourage crypto adoption include a volatile rand and the absence of strict digital currency regulations.
However, the new crypto laws coming in 2020 could stifle the growth of cryptocurrency in the country. For now, the only piece of crypto governance in the country is the tax law drafted in 2018.
Crypto Scams Rife in South Africa
Governments and regulatory bodies constantly warn investors not to engage in cryptocurrency schemes because of the risks involved. In South Africa, there are cases of bad actors fleecing unsuspecting investors of their money.
Back in July 2019, victims of a bitcoin scam orchestrated by the owner of a fraudulent South African bitcoin company burned down the owner’s house. The man, Sphelele “Sgumza” Mbatha, set up a Ponzi scheme and promised investors bogus returns in 15 working days. As is the case in most situations, the owner allegedly fled town with clients’ funds.
Also, at the beginning of 2019, the South African Cricket Team came out to state that hackers hacked into the team’s official Twitter account to sell fake bitcoin lottery. The cricket team, however, recovered their account and deleted the fraudulent tweets.