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.
Keywords: Middle East and Africa, South Africa, Banking, AML/CFT, Cyber Risk, Basel, Regulatory Capital, Financial Stability, Crypto Assets, Crypto-Asset Regulation, SARB
Previous ArticleISDA Consults on Implementation of Fallbacks for Certain Swap Rates
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
The China Banking and Insurance Regulatory Commission (CBIRC) published the administrative measures for internal control of wealth management companies, which come into force on the day of promulgation.
The Prudential Regulation Authority (PRA) proposed its approach to policy-making as it takes on wider rulemaking responsibilities under the Financial Services and Markets Bill.
The European Central Bank (ECB) published its opinion on the proposal for a regulation on harmonized rules on fair access to and use of data (Data Act).