South African Treasury to Finalize Amendments to Relevant Laws on Crypto Regulations in June 2022

Introduction

The South African Treasury announced that it is anticipating the amendments to the country’s financial laws to be finalized in June 2022. The amendments will enable crypto asset service providers to be recognized as accountable institutions, in line with the Financial Intelligence Centre (FIC) Act.

As reported by Bitcoin.com News, “[T]he move to regulate crypto service providers comes as South Africa is attempting to address the ‘significant weaknesses in the country’s anti‐money‐laundering and counter-financing of terrorism systems’ that were identified by the Financial Action Task Force (FATF).”

In South African Treasury’s budget review document, it explains that the proposed amendments, which have been open for public review since June 2021, will ensure that the FIC Act is aligned with the standards set by the FATF.

“This change would address concerns around money laundering and terror risk financing through crypto-assets and align the act to the standards set by the FATF for virtual assets and related service providers,” said the Treasury in the budget review document.

The Treasury’s latest remarks on crypto assets are coming months after the Intergovernmental Fintech Working Group (IFWG) released a position paper calling for the regulation of crypto assets. It must be noted however that, as reported in 2021 by Bitcoin.com News, the IFWG insisted that call did not mean it was endorsing cryptocurrencies.

Among the expectations of the Treasury as revealed in the budget review document, is that crypto assets be declared “financial products” under the Financial Advisory and Intermediary Services Act (FAIS), which is aimed at protecting consumers. The document explains:

“According to this declaration, any person providing advice or intermediary services related to crypto-assets must be recognised as a financial services provider under the act and must comply with the act’s requirements. This will include crypto-asset exchanges and platforms, as well as brokers and advisors. This work is expected to be finalised in 2022.”

The review document also reveals that work is underway to have crypto assets regulated under the country’s Exchange Control Regulations of 1961.

On stablecoins, the document stated that the IFWG will publish a follow‐up paper later this year, which will address the risks that are identified with the assets. Another important revelation by the document is the South African Treasury exploring ways “to regulate electricity‐intensive crypto mining” which it claims “is environmentally harmful.”