One of the common questions about crypto and digital assets relates to the regulation and legality thereof. This is absolutely right - if you are doing stuff with money, in whatever form, then the right regulation is important. Fortunately, things are moving in the right direction, and South African regulation is coming along, albeit a bit slowly.
At a global level, there are a handful of bodies who oversee and advise on global financial issues. These include the Financial Action Task Force, the International Monetary Fund, the Bank for International Settlements, and so on. What these organisations are doing is to issue guidance in their area of expertise: FATF on financial crime, BIS on banking, the IMF dictating to developing countries how they should be doing things. This guidance is considered at a national and regional level when countries get onto writing their regulations. At that level, there are some jurisdictions that exert a large influence because of their scale or significance, some that are innovators, and some who follow along. The first group contains the EU and the US, who are on different paths. The US is still at the stage of trying to apply old rules via legacy agencies to this new world. This is contentious, litigious and ineffective. The EU has drafted a comprehensive set of regulations called MiCA (Markets in Crypto Assets), which will probably form the basis of much other legislation. The innovative jurisdictions include Singapore, which seems to be aiming to become the centre of new ideas in this space, and Japan, who may be early because they were the host to the first big crypto hack: Mt Gox in 2014. The right regulations work though: FTX Japan customers got all their money back within a few months of the business blowing up.
South Africa is very much in the last group of "follow along" regulators. This is not a bad thing; it's entirely logical. SA wants to be consistent with global norms, and doesn't really have the resources to do the work needed to be a pioneer. We do have a few tricky aspects to our financial environment though, not least exchange control, which doesn't really work well with crypto. So far (October 2023) there have been three major things from a regulatory perspective, which I have written about on BMA's blog, so I will direct you there.
Firstly, banks were heavily steered towards banking, or not de-banking, crypto related businesses, or Crypto Asset Service Providers (CASPs). This was in August 2022.
Secondly, crypto was declared to be a financial product, forcing CASPs to register under the Financial Advisory and Intermediary Services Act, meaning they are responsible for anti money laundering etc. That was in October 2022 and gave CASPs until the end of November 2023 to register.
Thirdly, about a month later, CASPs were listed as Accountable Institutions under the FIC Act, giving them more responsibilities that bring them in line with traditional financial institutions.
In each case, the changes were logical and expected. The SA regulators have been pragmatic and sensible in their approach. Next we have been promised some kind of stablecoin guidance, but it seems that discussion is still happening behind the walls of the Reserve Bank. Then there is exchange control, which means declaring crypto to be capital, but which brings additional complications, which is probably why we haven't seen it yet. But overall, it is all sensible. I may not remember to update this when things change, so keep an eye out for more.
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