P Xenos and M Bacina
South Africa enacts crypto capital controls
The Reserve Bank of South Africa (SARB) is introducing new regulations regarding how people can, and should, hold cryptocurrency.
The new rules will come into effect during the first quarter of 2020 following a consultation period that lasted for almost five years.
Kuben Naidoo, the bank’s deputy governor, has indicated that SARB's primary concerns are preventing white-collar crimes and putting an end to cryptocurrency fraud/scams.
Digital currencies can be used to evade currency controls, and the bank is looking to ensure this risk comes to an end. Thus, one of the new rules will be to limit the amount of currency leaving the region.
The rules require that banks investigate when a substantial amount of digital currency is transferred to an outside wallet or an overseas party.
The transactions limits which will not require the bank's attention is R1 million (AUD$100,000/USD$70,000-). For transactions above that amount, South African citizens must comple an application to the South African Revenue Service, to send a further R10 million (AUD$1M/USD$700,000) out of the country for foreign investment purposes.
This is a currency control on digital currency transactions, albeit a generous one. South Africans to a total of R11m that they are allowed to send across the border, resulting in high net-worth individuals looking to protect their wealth against the rand’s devaluation and seeking out alternative methods to send their money out of the country.
Africa throughout recent years have had a relatively mixed relationship with cryptocurrency. Several smaller banks, such as the First National Bank (FNB), have already sought to limit the amount of digital currency activity. The FNB is considered one of South Africa’s “big five” banks and has already shut down customers’ accounts that may be dealing in digital assets.
Many see Africa as a region ready for digital currencies to reach the unbanked. The CEO of Twitter Jack Dorsey recently announced that he would be moving to an unnamed country in Africa in order to establish a stronger digital currency presence on the continent and increase exposure to crypto trading.
Dorsey recently tweeted:
Sad to be leaving the continent… for now. Africa will define the future (especially the bitcoin one!) Not sure where yet, but I’ll be living here for three to six months mid-2020.
In addition, several new blockchain and crypto startups have chosen Africa as their home, among them Bit Hub, which was founded four years ago by John Karanja. The company seeks to promote the presence of crypto in the country and limit the failings of traditional finance in Africa.
it remains to be seen if the rest of Africa will follow South Africa's pursuit for stricter crypto capital controls. At this stage the continent as a whole continues to remain a bright spot in the global proliferation of blockchain and the crypto landscape.