According to Bloomberg, South Africa has mandated that all crypto exchanges operating within its borders must secure licenses by the end of the year. The Financial Sector Conduct Authority (FSCA), the country’s financial regulator, has already received approximately 20 applications since the licensing process was initiated a few weeks ago.
FSCA Commissioner Unathi Kamlana has warned that the regulator will take enforcement action against firms that continue to operate without a license beyond the November 30 deadline. This could result in these firms being shut down or fined. Kamlana explained that the regulatory framework was introduced due to the potential harm that financial customers could face when using crypto products.
South Africa, Africa’s most developed economy, is the first country on the continent to require digital asset exchanges to secure licenses. This move affects several major trading venues that originated from South Africa, including Luno, owned by Digital Currency Group, and Pantera-backed VALR. Global platforms such as Binance that operate in the country will also need to secure licenses.
The trend of intensifying regulations is not confined to South Africa alone. Yesterday, the Monetary Authority of Singapore (MAS) announced that crypto service providers in Singapore are required to place customer assets into a statutory trust by the end of the year for secure storage. This action underscores a global shift towards more stringent regulation in the cryptocurrency sector.
The Advertising Regulatory Board (ARB) in South Africa has introduced a new provision for the cryptocurrency business. This clause is intended to safeguard consumers against unethical advertising in the cryptocurrency industry.
A new clause was added to Section III of the advertising code for the nation of South Africa, and it stipulates that businesses and people in the country are required to comply by specific advertising standards relating to the offering of cryptocurrency-related goods and services.
‘Expressly and clearly’ stating that investments may result in the loss of cash “since the value is changeable and may go up as well as down” is something that all advertisements, including those for cryptocurrency offers, are required to do according to the first clause of the regulation.
In addition, advertisements indicating prospective investment losses must not contradict any cautions that are given.
It is essential that marketing communications for certain services and goods be presented in a way that is “clearly understood” to the target demographics.
Advertisements are required to provide statements that are fair and impartial on the returns, features, advantages, and dangers involved with the product or service being promoted.
Rates of return, predictions, or forecasts must also be fully supported, including a description of how they are computed and an explanation of what circumstances apply to the returns that are being promoted.
Any information referring to prior performance cannot be used to guarantee future performance or returns, and it should not be presented in a manner that generates “a favourable image of the marketed product or service.” [Case in point:]
It is inappropriate for advertisements placed by bitcoin service providers who are not also registered credit providers to promote the purchase of cryptocurrencies through credit.
Nevertheless, this does not stop service providers from promoting linked payment options that they provide to customers.
Additionally, it is going to be required of social media influencers and brand ambassadors that they will conform with particular advertising guidelines.
This includes the need that truthful information be shared, as well as the ban against giving advise on trading or investing in crypto assets and the prohibition against making claims of advantages or returns.
According to a blog post published by a worldwide organization on November 22nd, the International Monetary Fund (IMF) is advocating for more regulation of crypto exchanges in Africa, which is one of the markets with the highest growth rate in the world.
The collapse of FTX and the subsequent effect it had on the prices of cryptocurrencies is “prompting renewed calls for greater consumer protection and regulation of the crypto industry. ” according to the International Monetary Fund (IMF), one of the reasons why countries in the region should embrace regulation. The IMF cited this as one of the reasons why countries in the region should embrace regulation.
In addition, the authors claim that “risks from crypto assets are evident” and that “it’s time to regulate” in order to establish a balance between avoiding risk and making the most of innovation.
The article, which is based on the Regional Economic Outlook for sub-Saharan Africa for October 2022, warns that “risks are much greater if crypto is adopted as legal tender” which poses a danger to public finances if governments accept crypto as a form of payment.
According to the statistics provided by the IMF, just one quarter of the nations located in sub-Saharan Africa have explicitly controlled cryptocurrencies, while the remaining two thirds have adopted certain limitations.
On the other side, Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of the Congo have already prohibited the use of crypto assets. This accounts for twenty percent of the nations that are located in the sub-Saharan region.
The biggest concentrations of users may be found in the countries of Kenya, Nigeria, and South Africa.
According to statistics provided by the analytics company Chainalysis, the value of Africa’s cryptocurrency market surged by more than 1,200% between July 2020 and June 2021. The growth was driven mostly by increasing adoption in Kenya, South Africa, Nigeria, and Tanzania.
According to a report by Cointelegraph, Ghana is conducting tests for a digital currency that would be issued by the central bank (CBDC).
In Chainalysis’ Global Crypto Acceptance Index, Kenya and Nigeria were placed 11th and 19th respectively. Ghana has the potential to attain levels of cryptocurrency adoption comparable to those of Kenya and Nigeria.
The Financial Sector Conduct Authority (FSCA), a financial institutions market conduct regulator in South Africa, announced on Wednesday that the country has declared crypto assets as financial products in the jurisdiction.
In a gazette notice published on Wednesday, the Financial Sector Conduct Authority defined crypto assets as “a digital representation of value” that is not issued by a central bank, but can be traded, transferred or stored electronically “for the purpose of payment, investment and other forms of utility.”
The watchdog said that move aims to make it easier for local regulators to monitor the market and help to safeguard users.
The change takes effect immediately and falls under the Financial Advisory and Intermediary Services Act 2022. The announcement is the first legal step that was required to bring the crypto sector within the South African legal framework.
In July, South Africa Reserve Bank (SARB) announced plans by the central bank to adopt legislation that aimed to classify and regulate crypto assets as financial assets to balance innovation and investor safety. During that time, Kuben Naidoo, the Deputy Governor of South Africa Reserve Bank (SARB), said the regulations intended not to recognize cryptocurrencies as a payment method but as a financial instrument that may also be used in the mainstream sector.
Under the proposed regulation, a person offering advice regarding crypto assets would be required to be licensed as a financial services provider and to comply with the relevant requirements of both FSCA and the country’s Financial Intelligence Centre (FIC). This aims to ensure proper monitoring, reporting and oversight by the FSCA and FIC overall crypto-asset transactions.
In August, South Africa’s central bank formally advised local commercial banks to work with crypto exchanges/crypto asset service providers (CASPs). In the past, some local banks were unwilling to offer banking services to digital asset providers.
In an attempt to avert financial crimes and illicit activities associated with crypto asset transactions, the central bank also announced plans to develop a regulatory framework for crypto exchanges and platforms to allow for crypto listing. The plan would also include compliance with know-your-customer (KYC) protocols and tax and exchange control requirements. It appears that the proposed regulations by South Africa are consistent with proposals being developed by other central banks and regulators in the international market.
The South African Reserve Bank (SARB), the Central Bank of South Africa, has formally advised local commercial banks to work with cryptocurrency exchanges/crypto asset service providers (CASPs).
The Central Bank on Thursday issued a guidance note to commercial banks for dealing with transactions by crypto asset service providers.
In the note, signed by Fundi Tshazibana, the CEO of the South African Reserve Bank, stated that the Central Bank is aware that certain banks in the nation have previously opted to terminate banking services offered to crypto service providers.
According to the note, the banks opted for cutting off companies that offer cryptocurrency services because of the risks associated with money laundering, terrorism financing, and proliferation financing that come with the crypto service providers’ lack of formal regulatory requirements.
In the note, although the SARB acknowledged the banks’ reasons for such terminations, it went ahead and said that risk assessment by banks should not imply that they should seek to avoid risk entirely by cutting off banking services from crypto asset service providers (also known as de-risking).
Banks outright terminating crypto firms’ accounts threatens financial integrity in general, the note said.
For this reason, the financial watchdog encouraged banks to evaluate risks on a case-by-case basis instead of avoiding crypto-related businesses entirely.
South Africa’s Central Bank concluded the note by saying that the decision to de-risk should be made only if the risk posed by a particular client or business is too great to manage successfully. The SARB further emphasized that the decision must be made with due diligence and consideration.
Welcoming to Regulate Crypto Assets
The SARB announcement comes after South African crypto service providers have long argued that unbanking them is discriminatory and hurtful to them.
In March last year, crypto business providers in the country raised concerns that the lack of clear regulations in the digital assets industry hinders their business operations.
In March 2020, First National Bank, one of South Africa’s big five banks, terminated the accounts of major crypto exchanges, including Luno and VALR.
In October last year, Standard Bank, another local big bank, sent shockwaves through South Africa’s cryptocurrency industry when it notified automated cryptocurrency arbitrage services that it was terminating their accounts.
The greenlight issued by the Central Bank for lenders to serve crypto clients comes after the regulator recently announced plans to regulate the crypto industry.
Last month, the South African Reserve Bank disclosed plans to introduce a regulatory framework to govern crypto transactions, and classify cryptocurrency as an asset, rather than a currency.
The South African Reserve Bank (SARB) announced on Wednesday plans to introduce a regulatory framework for cryptocurrencies, Kuben Naidoo, the Deputy Governor of the Central Bank, revealed.
After years of taking a soft stance that it would not regulate the crypto industry, the Central Bank of South Africa has changed their mind by working to establish a regulatory framework to govern digital asset transactions.
In a webinar titled: ‘The future of money, banking and crypto’, organized by financial services firm PSG Konsult Ltd, Naidoo said: “Our view has changed and we now regard it [cryptocurrency] as a financial asset and we hope to regulate it as a financial asset. There has been a lot of money that has flowed in, and there is a need to regulate it and bring it into the mainstream.”
The Deputy Governor stated that the regulatory framework for the use of cryptocurrencies will perform a crucial role in ensuring investor protection and confidence and creating a safer crypto ecosystem in South Africa.
“The use of crypto for money-laundering and other illicit activities is a source of concern. 90% of transactions involving crypto-currency in the US are for the purchase of opioids or gambling tokens,” Naidoo highlighted.
The executive mentioned that while regulations could take 12 to 18 months to see their implementations, some know-your-customer (KYC) rules and licenses for exchanges will be enforced much earlier. He said the Central Bank is close to finalizing the exchange control rules and requirements.
Naidoo also disclosed possible plans by the Central Bank to issue a national Central Bank Digital Currency (CBDC). He stated that the regulator is currently conducting research and experiment on a CBCD project.
Digital Road Ahead
South Africa is one of the top 10 countries for cryptocurrency adoption in Africa, according to a recent report by Chainalysis, a blockchain data platform.
The crypto regulatory landscape in the country is still in a state of uncertainty. Although regulators like the Central Bank and the Financial Services Conduct Authority (FSCA) are yet to implement any regulations, the sentiments of these agencies towards crypto regulations have evolved.
Some regulatory framework is now expected not so far in the future. Such movements have been triggered by the rising concern of customer protection in the wake of the country’s $4 billion in cryptocurrency scams.
Regulation in the crypto industry is essential to ensure the new technology goes mainstream and lays the foundation to develop key relationships, such as with banking institutions.
The Bitcoin remittance business is blowing up all over the world. South African financial websitemoneywebbrings us the report directly from the oldest continent. The conditions that led to El Salvador making Bitcoin legal tender are present all over Africa. The people are unbanked but everybody has mobile phones. Plus, the diaspora is huge and sends money home constantly while big companies rob them blind with high fees.
Related Reading | Is Largely Unbanked Africa Primed for Bitcoin Adoption?
“The African continent has many opportunities for widespread Bitcoin adoption. One of those opportunities is remittance fueled by Africa’s growing ~mobile~ population. There are over 30 million Africans living outside their countries of origin. Since 2012, the African Union considers the African diaspora the sixth Africa’s region.”
On one hand, “countries such as South Africa, Nigeria, and Kenya” want to regulate bitcoin and other cryptocurrencies. On the other, “According to the World Bank Global Findex, 60% of the population” in the continent are unbanked. The recipe is there. And Bitcoin remittances might be the use case to bring mass adoption to Africa.
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Remittance Revolution, Factor 1. Mobile Wallets
Not only is the mobile population growing, but the whole continent also has ample experience with other forms of “mobile money.” It’s a concept already entrenched in the culture:
“Africa is the global leader in mobile money usage. Sub-Saharan Africa has the fastest growing mobile money industry in the world. The region will continue to see substantial growth in the number of people owning mobile phones. Mobile subscribers in Sub-Saharan Africa are projected to reach 623 million by 2025, half of the continent’s population. The figure will be even higher because of mobile phone sharing culture.”
From there to using Bitcoin, the most efficient money network in the world, it’s just a step. The road is clear.
Factor 2. Government Policies
Inadvertently, governments all over the African continent are pushing Bitcoin adoption with their restrictive policies. For example
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“In 2020, the Central Bank of Nigeria suspendedinternational mobile money transfersto Nigeria. The suspension came after the banking regulator allowed US dollar payouts for international remittances in the country.” And that “means that only Nigerians with a bank account will be able to receive money from abroad. Not all international money transfer services to Nigeria support cash payout.”
Everyone underestimates the rate of #Bitcoin adoption in Nigeria, it will be a major religion soon.
— Bernard ‘berlin’ Parah ⚡️ (@bernard_parah) February 5, 2022
What have the Nigerians done? Turn to Bitcoin remittances, of course.
Another example:
“In Zimbabwe, several restrictive monetary policies have led to the growing interest and use of bitcoin for remittances. First, the government banned all foreign currencies such as the US dollar, Euro, South Africa rand, and others. The government also placed restrictions on mobile money services, as well as daily withdrawal limits because of severe fiat currency shortages. To bypass these restrictive policies by the central bank, a growing number of Zimbabweans prefer bitcoin remittances to fiat money.”
Remittance Revolution, Factor 3. Weak Currency
This factor wasn’t present in El Salvador, which is a dollarized country. However, in Africa, there are several “countries that experience double-digit inflation such as Zambia, Zimbabwe, Nigeria, Sudan, South Sudan, Ethiopia, Liberia, and Sierra Leone.” For example:
“The Guinean franc is one of the world’s weakest currencies as we launch into 2022. In 2020/21, the Zambian kwacha and Zimbabwe’s dollar were one of the worst performing currencies in the world. The Nigerian naira has lost more than 50% of its value since 2015. The Central Bank of Nigeria devalued the naira thrice in 2019. In May 2021, the central bank devalued the naira by 7.6%.”
What have the Nigerians done? Adopt Bitcoin remittances. What will the other countries do? Adopt Bitcoin remittances, also.
Who said Kenyans don’t own #Bitcoin..
Kenya Ranks 2nd in Africa in P2P settlement, overtaking South Africa 🌍.#cryptocurrencyKE 🇰🇪#africarising 🖤 pic.twitter.com/fg8Ivj3mQA
— CRYPTOCURRENCY KENYA 🇰🇪 (@CryptoHubKE) February 8, 2022
Factor 4. Transfer Fees And Speed
The remittance fees were a prominent factor in the El Salvador story. And in Africa, the story repeats itself:
“A study by the World Bank shows that transfer fees to Sub-Saharan Africa, the poorest region in the world, arethe highestin the entire world. The cost of sending $200 to Sub-Saharan Africa towards the end of 2020 was 8.2% on average. Sending money within Africa is even more expensive.”
What will the whole Sub-Saharan Africa do?
I could wait another 25 years for the ANC to do good on their promises to fix some of historical injustice in South Africa, or I can take control of my own life and buy #bitcoin now.
— Tensai Bankai⚡️ (@tensaibankai) February 8, 2022
Remittance Revolution, Factor 5. Education
This is a positive one, for a change. According to BTrust’s Abubakar Nur Khalil, ina recent article for Bitcoin Magazine:
“Africa is home to more than a thousand indigenous languages, with non-English speaking countries. The majority of Bitcoin material available is in the English language, which means we must also engage in translation efforts to unlock knowledge for millions of non-English speakers on the continent, both on the developer and user front.
Currently, there are efforts around Africa to translate Bitcoin material into different languages such as Amharic, Arabic and Wolof byKal Kassa,Arabic_HODLandFodé Diop, respectively, with ongoing work on others.”
Related Reading | South African Man Loses $900,000 Worth Of Bitcoin After Accidentally Deleting Keys
And we also have to mentionExonumia, who is “creating open source African language translations for Bitcoin literature through community.” And, of course,the BTrust. The organization created and financed by Jay-Z and Jack Dorsey is on a mission to promote Bitcoin development in Africa and India. One of its board of directors members, Abubakar Nur Khalil, recently spoke to Bloomberg Technology about the initiative.
Meet one of the board members of Jay-Z’s and Jack Dorsey’s blind Bitcoin trust: Recursive Capital CEO Abubakar Nur Khalil in Nigeria. He tells @sonalibasak how he envisions web3 in Africa https://t.co/IdyBB7wTvb pic.twitter.com/eFKEga4Nbg
— Bloomberg Technology (@technology) February 4, 2022
Conclusions And The Market
There are negative factors that affect Bitcoin positively, like high fees, weak currencies, and worse government policies. And there are positive ones, like high mobile adoption and available education. The mix might form a perfect storm for Bitcoin adoption in Africa. And the Bitcoin remittances revolution is leading the way.
BTC price chart for 02/10/2022 on Bitstamp| Source: BTC/USD on TradingView.com
After a recent surge of sorts, Bitcoin has been trading horizontally for the last few days.
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The police in South Africa are looking into a possible crypto scam case after an investment company attempted to reimburse some investors from the now-defunct Africrypt exchange.
Police Launch Closer Look at Africrypt
Bloomberg informed that South African Police forces across four provinces, including Durban and Johannesburg, are currently investigating reports in connection to the alleged Africrypt scam from 2021 involving co-founder brothers Raess and Ameer Cajee.
The coverage states that Dubai-based investment company Pennython Project Management LLC approached a number of out-of-pocket investors of the exchange and attempted to offer a portion of the lost investment.
Following the offer from Pennython, the investors are now pushing for the arrest of both Raees and Ameer Cajee, whose whereabouts remain unknown.
Lieutenant Colonel Philani Nkwalase from the Hawks police unit disclosed that investigations are ongoing, and the police plan to work with the multiple victims of the case. Regarding the official value lost to the alleged fraud, Nkwalase stated that relevant financial records continue to be analyzed, and the exact figure remains unknown.
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The Cajee brothers are still untraceable since April 2021, when about 69,000 bitcoin (BTC) mysteriously disappeared from the Africrypt exchange. Suspicions soared after Ameer, the Chief Operating Officer of the platform, issued a statement explaining the situation as a hack and urged customers to avoid reporting to the authorities.
Some investors were reportedly unsatisfied and hired law firm Hanekom Attorneys to look into the incident. Hanekom discovered that Africrypt employees lost back-end access seven days before the supposed hack, followed by the transfer of missing funds via mixers or to other large pools of BTC, which made the funds harder to trace.
More Regulatory Policies Needed as Crypto Adoption Soars
South Africa’s lack of cryptocurrency regulatory policies could prove a stumbling block in ongoing investigations into the Africrypt Saga. As the head of enforcement at the country’s Finance Sector Conduct Authority (FSCA), Brandon Topham said last year, crypto assets do not fall under the category of recognized financial products.
However, the FSCA also announced plans to introduce a regulatory framework designed to offer some protection for digital asset holders in South Africa.
This comes as no surprise as digital asset usage continues to grow across the continent. According to data from Chainalysis, Africa experienced a staggering 1,200% rise in crypto adoption in 2021 alone.
Also, a survey by London-based firm Luno revealed that 50% of Africans invest in cryptocurrency to pay for their children’s education. This further reinforces the narrative that crypto is growing in Africa.
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It’s time for the Btrust to start making moves. And they did so by announcing their “to-do list” and “high level goals.” A month ago, Block CEO Jack Dorsey and rapper and entrepreneur Jay-Z announced the members of the board for their 500 BTC blind trust. Btrust’s purpose is to “make bitcoin the internet’s currency” and their field of action is Africa and India.
Hello World 👋
We’ve been working hard on getting ₿trust set up. To start out, we’ve broken up our to-do list into a set of high level goals.
Each of these tasks require careful thought. We’ll be requesting feedback from the community on individual items in the weeks to come!
— btrustteam (@btrustteam) January 11, 2022
Said members of the board took charge and recently showed the world what they’ve been working on since they did so. “Each of these tasks require careful thought. We’ll be requesting feedback from the community on individual items in the weeks to come!,” Btrust said inits inaugural Twitter thread. Before going through those tasks, though, let’s remember who those members are. At the time,NewsBTC reported:
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“The blind trust’s board members are: Ojoma Ochai, Obi Nwosu, Abubakar Nur Khalil, and Carla Kirk-Cohen, the only South African of the bunch. By just casually looking at their Twitter feeds it becomes obvious that they’re all thoroughly dedicated to Bitcoin already.”
Related Reading | South African Man Loses $900,000 Worth Of Bitcoin After Accidentally Deleting Keys
Ina recent interview with Blockworks, 22-years old Abubakar Nur Khalil said:
“It’s very, very important for us to keep it as transparent as possible,” he said. “We’ll be communicating a lot about the process, our thinking and the things we’re going to be doing going ahead primarily through Twitter.”
And so they did. Let’s explore what that process looks like and what the Btrust will be working on in months to come.
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BTC price chart for 01/12/2022 on Coinbase | Source: BTC/USD on TradingView.com
Btrust’s Guiding Principles And Jurisdiction
Following Bitcoin’s lead, the first thing the Btrust will do is to establish “Genesis Principles.” In other words, “Btrust’s vision will be laid out in an immutable set of principles.” Everybody involved in the organization will follow them, and there will be the option of using soft-forks and hard-forks to resolve disagreements or to accommodate different visions.
There’s another caveat, “Boards are bound to act in accordance with the principles, but the implementation is their prerogative. This provides flexibility, while staying true to Btrust’s vision.” So far, so good. This all sounds very Bitcoiny.
2️⃣ Implement Principles
We’ll outline how we’re going to implement each of the principles in our work.
Boards are bound to act in accordance with the principles, but the implementation is their prerogative.
This provides flexibility, while staying true to ₿trust’s vision.
— btrustteam (@btrustteam) January 11, 2022
The next step is crucial, “Entity and Jurisdiction.” Under what jurisdiction will the Btrust operate? What type of entity will they choose to be. “Btrust requires a formal entity to hire employees, contract the board and provide a legal system to hold representatives accountable.”
In relation to this, Nur Khalil told Blockworks:
“We’re looking at starting with Africa initially, but then gradually expanding into other regions in the global South,” Nur Khalil said. “So that’s places like India as well. And then in general, with regards to the overall vision, we feel there’s so many disparities in some of these regions like Africa in terms of the actual amount of talented developers versus those of them that are actually working on Bitcoin.”
Custody And Communication
This is a great opportunity to test out Bitcoin’s multisig superpowers. “We will work on a proposal outlining various custody solutions, with the end goal of safely taking custody of the 500 BTC.” Also, important for people out there, Btrust will be hiring “a full time lead to manage daily operations.”
5️⃣ Recruit a Lead
Once we’ve delivered 1️⃣,2️⃣ and 3️⃣, we will be looking to hire a full time lead to manage daily operations of ₿trust.
This is one of the most important board responsibilities, and we’re looking forward to finding somebody to bring ₿tust’s vision to life!
— btrustteam (@btrustteam) January 11, 2022
Last but not least, they’ll build something. “We’re committed to building Btrust with input from the Bitcoin community. For now, we’ll be using twitter to communicate our progress, but it’s not scalable.” And they’ll raise funds to set up the organization. “We want to take our time to think about our approach to custody & company formation. This is a prerequisite for any investment. We’ll create a separate plan for how to cover any required set up funding.”
Related Reading | Spiral BTC Releases Lightning Development Kit. Jack Dorsey’s Puppet Promotes It
In relation to this, Nur Khalil told Blockworks:
“What we’re trying to optimize for is trying to do things gradually because there’s a lot and we won’t just look at the ecosystem and just throw a bunch of money on it. We still have to be meticulous on what the impact is.“
Great work so far, Btrust. We at NewsBTC are looking forward to covering your next steps and seeing what the future brings for the organization, Bitcoin, Africa, and India.
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