South Africa’s financial authority, the FCSA, is preparing a new regulatory framework for the crypto market in 2022, due to the explosive growth seen this year.
Compared to other regions of the world, the market for cryptocurrencies, in Africa is the smallest of all. However, the interest and adoption of digital assets in this part of the world has grown exponentially in the last year, creating one of the most dynamic and exciting crypto markets in the industry. According to the quarterly report According to a report published by Chainalysis last October, the crypto market in Africa grew by 1.200% in just one year, with countries such as Nigeria and South Africa at the forefront of this innovation. The level of cryptocurrency adoption in these countries is among the highest in the world, which has led financial regulators to consider creating a new regulatory framework for this growing market.
In the case of South Africa, the digital portal of the American company specialized in business Bloomberg reported that Unathi Kamlana, commissioner of the Financial Conduct Authority of South Africa (FCSA), plan unveil a new regulatory framework covering cryptocurrencies and digital assets early next year, in order to provide clarity and security to this booming and growing market.
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South Africa bets on crypto regulation
The FCSA wants to promote regulation of the cryptocurrency market to protect its investors from the potential risks that may arise within this industry. In July this year, the volume of transactions carried out with cryptocurrencies in South Africa exceeded 105.000 billion dollars, with P2P (peer to peer) platforms and services being where most of this volume occurred. These figures show that a large part of the adoption of cryptocurrencies in South Africa comes from retail investors and users, who see crypto assets as an efficient way to send or receive value. It is worth remembering that the difficult access of many citizens to the traditional financial system and the high commissions on remittance services have been the main drivers of the adoption of cryptocurrencies in the region.
The dynamics of P2P platforms have increased the cryptocurrency user base in the country, allowing transactions to exchange fiat money for cryptocurrencies, or vice versa, to occur directly between the users themselves. Likewise, although many use crypto assets to send or receive remittances and move value, others are also using them as investment assets to preserve their savings.
The rise and popularity of cryptocurrencies as investment assets may endanger the security and stability of retail investors, the financial regulator said, although He said he does not see significant risks within this market, as long as it is regulated.For Kamlana, regulation will rather help prevent potential risks that may arise within the crypto market. In addition, he sees crypto regulation as an important step towards the education and literacy of investors and users who participate in the new digital financial system that cryptocurrencies build.
cryptocurrency trading
Kamlana noted that South Africa's proposed crypto market regulation for 2022 will cover various sectors of the crypto industry, from cryptocurrency trading to the interaction of crypto assets with traditional financial markets. In November 2020, the financial authority imposed a new regulation to require cryptocurrency platforms and companies in the country to register with the entity, in order to receive its approval and license as financial service providers with crypto assets.
The International Monetary Fund (IMF) he pointed recently that the connection between cryptocurrencies and the current system has grown exponentially in recent years, requiring global regulation to safeguard the stability of investors and the international monetary and financial system.
Regulatory clarity
South Africa is moving towards clear regulation for the crypto market that provides the necessary protections to its citizens, although it does not seek to recognise cryptocurrencies as legitimate assets within its territory. For Kamlana, the great interest in cryptocurrencies can lead novice or unsuspecting investors to fraudulent schemes such as the one AfriCrypt, which is considered one of the biggest scams to have occurred within the industry, so the FCSA is focused on exercising strong oversight over cryptocurrencies to protect and defend investors from potential fraudulent schemes like this.
South Africa's central bank is developing a digital currency CBDC together with other banks in the region and the Bank for International Settlements (BIS), to test cross-border payments and transactions.
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