As the South African Reserve Bank (SARB) and the National Treasure has announced, the National Payment System act 78 of 1998 is outdated and is in the need of a review and amendments. A national Payment system (NPS) is a set of arrangements and infrastructure that allow the transfer between entities and individuals. The review is intended to amend the legislation and renew the payment system so that it aligns with the worldwide trends. The regulatory net should also cover the sectors of the economy that were not included in the previous system and were, therefore, unregulated until today. It also includes the cryptocurrency regulations in South Africa’s crypto industry to bring regulatory certainty in this space. It is one of the recommendations to design the new act in a way that enables new or unregulated service providers, services and instruments. These include distributed ledger technologies, fintech companies, and virtual currencies.
South Africa’s approach to the digital era in finances
Compared to many other African countries, for example, Zimbabwe which had taken a harsh anti-cryptocurrency position, South Africa is more open-minded and has modern views when it comes to the new technologies in the finance sector. At the beginning of the year, some of the authorities in a couple of jurisdictions were placing bans on cryptocurrencies, but fortunately, Africa’s most industrialized economy managed to avoid it and in the result, instead of banning, the central bank set up a team, with the task to monitor cryptocurrencies. We can surely say that South Africa is trying not to hinder the development of digital assets in its borders as cryptocurrency trading is very popular and common in the country; at the same time, the government is searching for ways to minimize the risks that can come with the rapid changing of the financial sector.
Recently, SARB and the National Treasury had announced a joint statement. They ensure that efficiency and safety of the national payment system can only be assured with the review of the 1998 act. The statement reads that as the financial industry is rapidly changing and moving towards the digital era; the payment systems and technologies are becoming more and more advanced. They naturally bring new risks and challenges to the traditional payment regulatory landscape. Together with SARB and the National Treasury, the South African regulatory body FSCA oversees the trading conditions and regulations.
Can laws about cryptocurrencies work?
When it comes to cryptocurrencies, the Reserve Bank chooses the self-regulatory approach on this industry. They have installed a self-regulatory body for reviewing the framework in April. As their explanation, self-regulatory organizations can be a better solution for the regulation of cryptocurrencies in South Africa. This approach was criticized by the apex bank, at that time they have argued that such regulations of cryptocurrencies could bring negative effects. Apex bank then made two main points against the self-regulation. The regulations can have negative consequences on the growth and innovation of the industry, therefore, they might hinder the development. The second reason is that making regulations for the industry that is not fully developed can be just a waste of time. If we make laws based on the technology that exists now, there is a risk that the technologies will have moved and changed so much by the time that the laws will be enforced, that they will be already outdated.
It is not known yet what kind of approach the Reserve bank and National Treasury will take, they are determined to review the outdated Act but it is not clear if they will include a framework for regulation of Bitcoin and other digital currencies. More information about the government’s plans for the payment system review will be available in February this year.
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