SARB to Bring Cryptoassets into Regulatory Purview
The SARB Intergovernmental Fintech Working Group (IFWG), through the Crypto Assets Regulatory Working Group (CAR WG), published a position paper on cryptoassets. The paper confirms that cryptoassets will be brought into the South African regulatory purview in a phased and structured manner. The paper sets out principles for regulating the cryptoasset service provides and offers 25 recommendations on how to bring cryptoassets into the South African regulatory remit. The recommendations are focused on three areas: anti-money laundering and combating the financing of terrorism (AML/CFT), cross-border financial flows, and application of financial sector laws. Also published was a set of the frequently asked questions (FAQs) on cryptoassets and the associated issues.
The intention is not to regulate the actual cryptoassets and associated products per se, but rather the entities that provide services in relation to such products. Therefore, the South African regulators intend to regulate cryptoassets by regulating the cryptoasset service providers, or CASPs. The CAR WG position paper on cryptoassets provides a roadmap for putting in place a framework for regulating cryptoassets, through the regulation of CASPs, in South Africa. It also serves to initiate the process for the individual financial sector regulators to implement the recommendations contained herein. There is, however, a need to continually refine, amend, and make additions to the position paper given the evolutionary nature of the subject matter. The IFWG articulates the following six high-level principles that will continue to guide the national approach to regulating cryptoassets in South Africa—
- Principle 1: cryptoassets must be regulated appropriately.
- Principle 2: An activities-based perspective must be maintained and the principle of "same activity, same risk, same regulations" must continue to apply and inform the regulatory approach.
- Principle 3: Proportionate regulations that are commensurate with the risks posed must apply (that is. a risked-based approach to cryptoasset regulation must apply).
- Principle 4: A truly collaborative and joint approach to cryptoasset regulation by the Working Group must be maintained.
- Principle 5: The dynamic development of the crypto market must continue to be proactively monitored, including maintaining knowledge on emerging international best practices (through standard-setting bodies).
- Principle 6: Digital literacy and digital financial literacy levels must be increased among consumers and potential consumers of cryptoassets.
Additionally, the CAR WG explicitly identified two priorities. One priority is to implement a monitoring program for cryptoassets while the other priority is to limit the exposure of prudentially regulated financial institutions and financial market infrastructures to cryptoassets, as the risk could over time spill over and create financial stability risks. The Group clarifies that the work on prudential regulation is ongoing at the BCBS level and South Africa will take its lead from BCBS when prescribing limits and determining the most appropriate regulatory treatment of prudentially regulated financial institutions’ exposures to cryptoassets.
Related Links
Keywords: Middle East and Africa, South Africa, Banking, AML/CFT, Cyber Risk, Basel, Regulatory Capital, Financial Stability, Crypto Assets, Crypto-Asset Regulation, SARB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Nick Jessop
Scenario modeling expert; risk management specialist; quantitative financial modeler
Previous Article
ISDA Consults on Implementation of Fallbacks for Certain Swap RatesRelated Articles
OSFI Issues Phase2 Consultation on Climate Scenario Exercise for Banks
The Office of the Superintendent of Financial Institutions (OSFI) recently announced a consultation on the second phase of the Standardized Climate Scenario Exercise (SCSE) for banks and other financial institutions it regulates in Canada.
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.