The adoption rate of cryptocurrency in Nigeria hits new highs and the price of Bitcoin has hit a more than 60% premium.
Cryptocurrency is continually expanding across sectors and countries across the globe. It’s becoming more and more evident that countries will need to find ways to integrate the digital market with their own currencies to offer the perks of blockchain-based currencies and to avoid their citizens from suffering from any risks.
The South African government has seen this and has reportedly started planning the roll-out of a national cryptocurrency regulatory framework for early next year.
According to a Bloomberg report, South Africa’s Commissioner of Financial Sector Conduct Authority Unathi Kamlana has said that the South African government will be rolling out a cryptocurrency framework early in 2022 with the intention to protect investors from the risky assets:
“What we want to be able to do is to intervene when we think that what is provided to potential customers are products that they don’t understand that are potentially highly risky. We must be very careful to not just legitimize them.”
The framework would be designed to work with the Prudential Authority and Financial Surveillance Board of the South African Reserve Bank.
The introduction of new regulations comes after investors in the country were hit by two major cryptocurrency scams that started in the country. Both scams took billions of dollars worth of investment from traders and investors and the founders disappeared with investor funds. Following the alleged disappearance of the co-founder of the South African crypto investment scheme AfriCrypt, the country’s financial authority said that it would not be taking action, with the rationale that cryptocurrency assets were unregulated in South Africa. As a result, the FSCA received criticism from the community as well as Binance who challenged the authority after receiving a warning. Binance implied that the country’s FSCA “lacked authority” to be issuing warnings to South African citizens.
Growing concern for investor protection from cryptocurrency scams across the globe will lock cryptocurrency into a more regulated space. This is as the digital asset industry has become a focal point for alternate investment. While some officials, like Kamlana, have noted that cryptocurrencies don’t necessarily pose a systemic risk to the financial sector (and most financial authorities see cryptocurrency as an asset rather than a cryptocurrency), there is still a risk in the market that might need addressing for longer-term sustainable adoption.
Cryptocurrency adoption and CBDCs
Cryptocurrency regulation across the world seems to be going hand-in-hand with the investigation and development of central bank digital currencies (CBDCs). According to Kamlana, for example, South Africa will be working to develop a stable coin based on the South African Rand (ZAR) as a responsible approach to innovation in finance. The regulator involved in creating the regulatory framework will be overseeing the monitoring of the stablecoin development to ensure security and protection are prioritised. While he hasn’t slated cryptocurrency, the Commissioner has advised investors to consider what the reserve bank develops as an investment. He noted:
“I think that if I were to give advice to retail investors, I would say wait to see what comes out of the process of the work of the central bank. The best outcome in terms of stable coins is what comes out of central bank innovation, given their reliability and stability.”
South Africa, as well as Australia, Singapore, and Malaysia, are all involved in a pilot program to trial international settlements using CBDCs. Announced in September, the joint project will develop prototypes for shared platforms to allow CBDCs to be used to pay international settlements. The trial also aims to allow institutions in the countries involved to use CBDCs for direct transactions. Increased speed and reduced fees will help improve cross-border payments and will act as a stepping stone for other CBDC use-cases.