South African Reserve Bank prepares regulatory framework for crypto assets
The South African Reserve Bank (SARB) and its Prudential Authority are drafting rules to bring crypto‑asset activity into the supervisory perimeter, aiming to curb risks that could threaten financial stability. Deputy Governor Fundi Tshazibana, who also heads the Prudential Authority, outlined the initiative during a media briefing on Friday, emphasizing that the bank does not view cryptocurrencies as legal tender.
Rapid adoption and scale of crypto use in South Africa
According to an inventory conducted by the SARB, the number of South Africans holding crypto‑trading accounts rose from roughly 4 million at the start of 2022 to about 8 million by the end of 2023 – essentially doubling in two years. Over the same period, local crypto platforms facilitated the externalisation of almost R63 billion since 2019, a flow that currently falls outside traditional exchange‑control reporting.
These figures illustrate how quickly crypto assets have moved from niche experimentation to a sizable segment of the domestic financial landscape.
Why regulators see a gap
Tshazibana warned that assets operating outside a clear regulatory remit create “concentration of risks” because supervisors cannot observe how payments are settled. He noted:
“If you have crypto assets that are outside the scope of regulation… if suddenly payments are made using crypto assets, there can be a concentration of risks because we don’t see how financial transactions are happening.”
The Prudential Authority lacks the granularity needed to map the ecosystem, which hampers early detection of stress points such as illicit flows, liquidity mismatches, or contagion to traditional banks.
Planned regulatory approach
The SARB is pursuing a dual‑track framework:
- Cross‑border payments: rules that clarify how crypto‑based transfers interact with existing foreign‑exchange controls.
- Domestic payments: guidelines for crypto‑asset service providers operating within South Africa, ensuring they meet anti‑money‑laundering (AML) and consumer‑protection standards.
Tshazibana stressed that designing these rules is complex precisely because crypto assets are not money in the conventional sense; they function more like programmable tokens that can represent value, assets, or claims.
Stablecoins and the “store of value” debate
Stablecoins—cryptocurrencies pegged to a fiat currency, commodity, or basket of assets—are a focal point of the discussion. While they can enable faster, programmable payments, current designs often fall short of the core attributes of money, such as universal acceptance and stable purchasing power.
Tshazibana explained that the implications differ depending on whether a stablecoin is rand‑denominated, backed by a foreign currency, or collateralised by a mix of assets. Each variant raises distinct questions about reserve adequacy, redemption rights, and potential impact on monetary policy transmission.
Monetary policy considerations
Because the SARB’s monetary policy signals travel primarily through the banking system, a parallel crypto ecosystem could alter how interest‑rate changes affect spending and investment. The deputy governor urged further study to understand:
- How crypto‑asset holdings influence the demand for reserves.
- Whether crypto‑mediated transactions weaken the traditional interest‑rate channel.
- What safeguards are needed to preserve policy effectiveness.
Global context: warnings from the BIS
The Bank for International Settlements (BIS) echoed similar concerns in its April 2024 global economic outlook. The BIS noted that while digital innovations can boost competition and efficiency in payments, they also challenge trust in money. Specifically, the report highlighted that stablecoin designs frequently lack the robustness required to function as reliable stores of value or mediums of exchange, posing risks to financial integrity.
Reference: Bank for International Settlements, “Annual Economic Report 2024,” Chapter 4: Digital Money and Financial Stability.
Moving forward
SARB officials say the forthcoming framework will aim to:
- Define clear boundaries for what constitutes a crypto asset versus a regulated financial instrument.
- Impose reporting obligations on exchanges and wallet providers to improve transparency.
- Coordinate with international bodies to ensure cross‑border consistency.
- Engage industry stakeholders to balance innovation with safeguards.
As the work progresses over the coming months, the Prudential Authority plans to publish consultation papers, inviting feedback from banks, fintech firms, consumer groups, and academia. The goal is to create a rule set that mitigates risk without stifling the potential benefits of distributed‑ledger technology.
