Despite rising usage, cryptocurrencies have long faced legitimacy issues in Africa. However, a Blockchain analytics company, Chainalysis, claims that the use of cryptocurrencies is expanding faster on the continent than everywhere else, with transaction volumes rising 1,200 percent between July 2020 and 2021.
The responses of African countries have varied over time, ranging from indifference, and a lack of regulation, to outright bans that have failed to stifle trade. For instance, financial administrators in Nigeria and Uganda have prohibited their financial institutions from facilitating and involving in cryptocurrency transactions. Also, 23 other African countries have either implicit or total bans on trading (Africa accounts for more than half of the countries that restrict the purchase of cryptocurrencies).
According to deputy governor Kuben Naidoo, the South African Reserve Bank plans to propose new rules on cryptocurrency trading in the nation within the next 12 to 18 months.
Naidoo stated that South Africa is on pace with other nations regarding cryptocurrency legislation. However, he added that the early euphoria surrounding digital currencies and technology has recently faded.
Naidoo said, “There is a need to regulate it and bring it into the mainstream, but in a way that balances the hype and with the investor protection that needs to be there.”
According to Naidoo, the recognition of cryptocurrencies as financial products comes first. This will enable the FIA to monitor cases of money laundering, tax evasion, and terrorist financing activities by the Financial Intelligence Centre (FIA).
The SARB then intends to create a regulatory framework for South African exchanges that will permit listing cryptocurrencies. This framework will include conventional banking requirements, including Know Your Customer (KYC) guidelines and exchange control regulations.
The Evil-Good in Crypto as a Financial Product
Financial products are investment types, or any investment of a financial nature, that integrate the elements of using capital, anticipating a financial return, and assuming a risk directly related to capital use.
By the preceding, contracts whose justification is solely the investment of capital (the “block” of savings) with the expectation of growth and no other services provided by the investor beyond the provision of a lump sum may be regarded as investment contracts with a financial cause.
Well, all you have to know is that purchasing bitcoins on a site represents a form of investment and, as such, it is subject to controls and authorizations by the FIA. In light of the principles mentioned above, it is possible that buying and selling bitcoins online violates laws governing financial intermediation. It’s important to note that the South African government may begin to accept cryptocurrencies as payment methods.