South Africa Moves to Regulate Cross-Border Crypto Flows

Instead of creating a broad exemption framework for cryptocurrency exchanges, the South African central bank plans to release a new framework later this year focused on cross-border crypto asset transfers.

Key Details of Proposed Framework

South Africa is taking significant steps towards regulating cryptocurrency transactions, as highlighted by Finance Minister Enoch Godongwana’s recent statements. Rather than drafting a comprehensive cryptocurrency exchange control exemption framework, the South African Reserve Bank (SARB) is set to publish a new framework later this year that will specifically address cross-border crypto asset transfers.

According to a report, Godongwana’s remarks came in response to inquiries from a lawmaker Wendy Alexander during a session of the Standing Committee on Finance. Since a High Court ruling that slammed the use of apartheid-era laws to regulate crypto assets, these remain exempted from South African exchange controls regulations.

Godongwana, meanwhile, emphasized that the SARB is currently engaged in discussions with the National Treasury and the Financial Sector Conduct Authority (FSCA) to finalize the framework. This collaborative effort aims to regulate the business activities of crypto asset service providers (CASPs) involved in externalizing and repatriating value through cryptocurrencies.

The framework is expected to outline essential parameters, conditions, administrative responsibilities, and reporting requirements for cross-border transactions involving crypto assets. This structured approach is designed to prevent regulatory arbitrage and mitigate the risks of illicit financial flows that may arise from such transactions.

“Further, the National Treasury is currently engaging the SARB on updating and strengthening the exchange control legislative framework to enable the above framework. The National Treasury, through the Financial Regulators Steering Committee — comprising the SARB, FSCA, Prudential Authority and the National Treasury — will coordinate further discussions,” Godongwana said.

Godongwana also underscored the importance of the SARB’s new framework in light of the risks associated with cryptocurrency. The Intergovernmental Fintech Working Group (IFWG) previously released a position paper identifying primary risks related to crypto assets.

The South African finance minister’s statements indicate a proactive approach by the South African government to regulate the burgeoning cryptocurrency market. By engaging with various financial authorities and stakeholders, the National Treasury aims to strengthen the existing exchange control legislative framework, ensuring that it aligns with the new SARB framework.