A report indicates that South Africa’s financial industry must be aware of the potential risks associated with cryptocurrency. They will also be expected to properly price in these risks.
The report includes Kuben Naidoo (CEO at Prudential Authority), a regulator of the banking sector, who explains how the drafting process will unfold. According to the CEO:
We are working quickly to establish the regulatory framework. It is crucial to define this product as a financial product before developing the regulatory framework.
Regulations to Defeat Scams
The South African regulators are feeling more urgent as they deal with the Africrypt crisis, which is the most prominent cryptocurrency investment platform to go under.
Bitcoin.com News reported that Africrypt collapsed shortly after directors Raes and Ameer Cajee ran with investors’ BTC originally believed to be worth billions. Investors have attempted to recover the BTC missing since then with the help of one South African law firm.
The collapse of Mirror Trading International (MTI), less than six months prior, preceded Afriypt’s dramatic collapse. MTI also collapsed following the disappearance of Johann Steynberg, its CEO. MTI investors have been trying to recover their funds ever since.
Naidoo is also the South Africa Reserve Bank’s deputy governor. He outlines some of the first steps regulators will take to prevent another MTI or Africrypt-type bitcoin investment scam. According to the report, one of these steps will be the creation of know-your customer rules for crypto exchanges. Exchanges will also be required to create systems to monitor the asset class to stop money being drained out of the country.
Naidoo says that after this, guidelines for investor protection and rules to manage capital risk in banks should be put into effect.