The Intergovernmental Fintech Working Group of South Africa issued a comprehensive document on April 16, expressing its attitude towards crypto assets.

The document contains more than 50 pages where you can find everything from basic concepts of description of use cases, risks, principles for regulation, overall policy and more.

What risks the IFWG sees and what is the current view

IFWG sees the greatest risk with the greatest consequences in jeopardizing the existing financial system. IFWG writes “The risk posed by crypto assets to the monetary policy transmission mechanism is that a significant increase in the demand for crypto assets would lead to the creation of a parallel and ltimately fragmented monetary system.”

The IFWG thinks that the system could become less efficient as demand for crypto assets would exceed interest in the fiat currency. There would be here a situation, where the monetary system would be conducted by private companies with individual objectives.

A look at the current situation is an favorable.

“Given the current use of crypto assets observed, crypto assets are not seen as posing a systemic risk as yet, and this risk is not probable of materialising in the near future.“

In other points, the financial authority also focuses on:

  • Consumer protection
  • The risk of an undefined legal and regulatory framework
  • Money laundering and terrorism financing
  • The exchange control risk
  • The market conduct risk
  • Operational risk, including cybersecurity risk, and more in the document.
Regulation of Crypto Assets, and attitude of South Africa

IFWG writes “This paper aims to ensure clear and consistent regulatory treatment by relevant regulatory authorities, taking cognisance of international approaches.”

One of the problems in the international regulatory approach is according to IFWG, is reacting of national authorities with varying degrees of regulatory stringency. It also argues that, in the absence of a specific regulatory approach at national level, are crypto assets borderless and their anonymity increases the difficulty of implementing proper regulatory and monitoring tools.

The IFWG and CAR WG have agreed on the following objectives for a crypto framework:

  1. ensure the safety and efficiency of the financial system and financial institutions;
  2. ensure consumer and investor protection, which includes financial
    consumer education;
  3. minimise opportunities for regulatory arbitrage;
  4. combat the circumvention of exchange control policy and regulations;
  5. combat illegitimate cross-border financial flows, ML/TF;
  6. combat tax evasion and impermissible tax avoidance arrangements; and
  7. support financial inclusion efforts and the advancement of technological innovation in a responsible and balanced manner.

South Africa takes crypto assets responsibly, and this document is also the result, that is elaborated in detail and describes all aspects. If you are interested in the full text you can download the document here.

What is the IFWG?

“The IFWG is a collaborative effort and resultant body of several South African financial sector regulators, including National Treasury, the Financial Intelligence Centre (FIC), the Financial Sector Conduct Authority (FSCA), the National Credit Regulator (NCR), the South African Reserve Bank (SARB) and the South African Revenue Service (SARS).”

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