As the number of crypto investors in the country increases, the South African watchdog has decided to come up with a new possible regulatory route to further protect the rights of investors. Last month,the Treasury announced that the number of crypto assets in the country has grown rapidly over the last five years.
According to the Treasury, the majority of people in the country are using 12 major crypto exchanges. The Treasury also noted that there are at least 2 million retail investors using these exchanges in the country.
It was also noted that the Treasury believes that a huge part of these investors are having a hard time grasping the real idea of the concept and the way they work and they are only focused on returns. This, according to the Treasury, can increase the risks that the investors are open to. The country is working on new crypto regulations to better control the market.
As cryptocurrencies move closer to the mainstream, the need for regulations increases. As the market becomes more accessible for investors around the world, crypto exchanges have to adhere to stricter regulatory frameworks around the world. However, different jurisdictions are taking different stances depending on their experience with cryptos.
South Africa had faced several challenges in terms of crypto trading over the past few years, specifically last year, when the country faced the allegedly largest Ponzi scheme of the country. There have been other crypto challenges in the country as well, which has created the need for new regulations.
The Intergovernmental FIntech Working Group of SA put out a special statement last Friday, talking about the importance of tighter rules in crypto trading. The agency noted that the crypto assets will enter the South African regulatory agenda in a phased and structured way. It also added that even if regulated, crypto assets are inherently risky due to high volatility.
The agency also put out a list of recommendations for creating a regulatory framework. The paper published by the agency talks about the need for better financial literacy in the country, due to the increased number of retail crypto investors in SA.
Crypto trading in South Africa
The country has millions of active retail crypto traders, a majority of whom are younger generations of the country. The tech-savvy younger South Africans are very interested in the crypto trading market, and the number of them is increasing very fast. In January, the daily value of crypto-asset trading in the country exceeded 2 billion rands, which is over $147 million.
This shows exactly how popular the market is. However, it should also be noted that the majority of these trading transactions were going unchecked by the regulatory agency, which has increased the risks.
One of the main reasons for the popularity of crypto trading in the country is the fact that is very easy to access. Modern technology offers people to trade crypto with just a few clicks. A majority of traders in the country are using automated crypto trading bots, which gives them the ability to invest in cryptocurrencies in just a few clicks.
A majority of these bots are capable of doing research for traders, as well as analyzing the market and even opening and closing positions. This is making crypto trading a lot easier and accessible for traders around the world.
With the new regulatory framework, South Africa is said to be embracing the crypto trading market. Compared to the other countries of the region, this is a completely different route. While SA is embracing its crypto trading market, other countries in the region are directing commercial banks to avoid processing transactions involving crypto assets.
The main motivation for the country to adopt a regulatory framework might come from the rapid crypto trading boom in the country, as well as the increasing number of crypto frauds. The new regulations are aiming to foster transparency and minimize the abuse and misconduct associated with the crypto market. The new regulations will largely focus on customer identification and verification, keeping records of clients and transactions, and monitoring any suspicious or unusual activity.
In addition, the Reserve Bank of South Africa has also announced that it plans to closely monitor crypto-assets and service providers for cross-border financial flows. Although the country tends to be positively assessed around crypto, it still plans to limit the exposure of banks and other financial institutions to crypto assets. The main reason for this is that the regulatory agency thinks that over time, the risks could potentially increase.
However, compared to other countries in the region, the approach of South African towards cryptos is very much unique. Other countries in the region, such as Nigeria, Kenya, and Zimbabwe, which also are considerably large markets for crypto trading, have recently banned banks from processing transactions relating to cryptocurrencies. This has resulted in the adoption of mobile money and other digital payments to settle crypto transactions.