South Africa’s financial regulator, the F.S.C.A, is planning to unveil a regulatory framework covering cryptocurrencies early next year. According to F.S.C.A commissioner, Unathi Kamlana, the purpose of this will be to help protect vulnerable investors from high-risk assets.
The new regulatory framework will also consist of rules on how cryptocurrency trading should be conducted in the country.
The FSCA (Financial Sector Conduct Authority) is a regulatory body responsible for market regulation, conduct, and supervision. Guided by fairness and integrity, the FSCA works to protect customers while promoting fair treatment in the sector.
South Africa: A New Regulatory Framework
The Financial Sector Conduct Authority will unite with the prudential authority and the financial surveillance board for this task. Their work will be to establish regulations on how the trading of tokens such as; Ethereum, XRP, and Litecoin should be
They will also examine how cryptocurrencies interact with traditional financial products, whether they threaten financial stability, and the risks they pertain to bank balance sheets.
“What we want to be able to do is to intervene when we think that what is provided to potential customers are products that they don’t understand that are potentially highly risky,” Kamlana said. “We must be cautious not just to legitimize them.”
The FCSA doesn’t believe that cryptocurrencies pose a significant systemic risk to the stability of the country’s financial services sector. But still, it hopes that the new framework will sufficiently address crypto interaction with traditional finance products and balance sheets and the threat they may pose to financial stability.
In conclusion, he noted that the regulator was patiently monitoring the South African Reserve Bank’s plans to develop its stable coin. And he was of the opinion that this was the closest approach to innovation.
“I think that if I were to advise retail investors, I would wait to see what comes out of the process of the work of the central bank,” he said.
“The best outcome in terms of stable coins is what comes out of central bank innovation, given their reliability and stability.”
Two recent crypto scams from within the country are what appear to have rattled the regulator. Both of the scams led to a significant loss in investment capital to the tune of billions of dollars.
Firstly, it was crypto investment firm Africrypt that disappeared with around $3.6 billion of bitcoin. Then it was the Mirror Trading International (MTI) scam that defrauded investors of some $589 million.
And apart from causing harm to the investors, these scams keep scaring away foreign and domestic investors, resulting in loss of national revenue. These cases are, however, not just found in South Africa. Over the past months, more targeted attacks have been directed on exchange companies, investor wallets, and client servers.
Currently, with each passing moment on the crypto space, it appears to be ‘open season’ on unsuspecting investors. Thus, deeper scrutiny on regulation is necessary.