THERE’S a lot of discussion about whether cryptocurrency regulation is necessary or not. People will comment that regulation prohibits innovation and growth, according to cryptocurrency exchange Luno's country manager, Christo de Wit.
Speaking to Personal Finance, De Wit said regulating the crypto industry was necessary and one of the things that needed to be considered was that regulation should to be timely. Cryptocurrency is being adopted by millions of people, not only in South Africa but globally.
De Wit said: “From a customer point of view, and a customer protection point of view, regulation is there to protect them, to put them in a position where they would feel safe to invest their hard-earned money into this new industry. That needs to be the underlying fundamental of any kind of discussion on regulation in South Africa.”
In an effort to regulate the industry, according to De Wit, the Financial Sector Conduct Authority (FSCA) declared crypto a financial product in October last year.
“They also announced an application framework and time line for crypto asset service providers, crypto exchanges like Luno, but also to any other companies that are within the industry to register.
“The application window to be awarded a financial services provider licence opened on June 1, 2023, and the application window closed on November 30.
“We are in full support of operating in a regulated environment. It would set the much-needed rules on how the industry goes about and conducts itself. Not only from a reporting point of view but also in terms of a customer protection point of view. And for a novel industry such as the crypto industry. I think these rules and regulations are very important to help the growth of the industry,” he said.
De Wit said the state of cryptocurrency in South Africa was at the forefront of the development of innovation.
“In terms of regulation, over the last 12 to 18 months, there's been a lot of discussion and talk globally about it. The United States of America is taking a different approach, almost a reactive approach towards regulation, whereas, in South Africa, all our regulators are taking a very proactive role.
“One thing that I think that the general public won't know and wouldn’t be aware of is that these regulators engage with the crypto industry in terms of educating and informing themselves about this new industry. I think we are leading the way globally. We are definitely on the forefront of a lot of exciting development and regulation creates a safe space for that development to happen,” De Wit said.
Crypto exchange firm Binance general manager of Southern and Francophone Africa Hannes Wessels said It was important for a country like South Africa, which was greylisted, to regulate the crypto industry.
“The country’s greylisting has to do with insufficient regulation. So one of the industries that need to be regulated is crypto. We can't say well, we have to regulate the banks, the trading firms, stockbrokers, and life insurance, but we're not regulating crypto.
“I think what the FSCA has done with the licensing window, allowing the crypto firms to apply to be licensed is the right thing to do. That’ll lift the standard of the industry,” he said.
Meanwhile, Western Cape Provincial Parliament member Cayla Murray said she thought crypto regulations had been put on the back burner in the country. She said there could be several reasons for this, but that did not mean it shouldn't be regulated.
“Various stakeholders have come together to finally start to regulate, and introduce several different interventions, but none of these initiatives are consolidated into one single form of regulation. And the risk of that is that we will have ad hoc or pick and choose sort of policy when it comes to regulating crypto,” Murray said.
“I think it's important to regulate the space as we have seen growth in the crypto community in South Africa, particularly in the Western Cape, where there are several service providers, but also a community of people who are developing in this space co-creating and starting new businesses.
“With that being said, with that economic hub we have at our disposal, we also need to think about the other side. How do we protect the consumer? So, for example, the horrific incidents at FTX, leaving so many families without being able to take care of themselves because they, unfortunately, invested in a company that eventually crashed, but because legally, regulation was not put in place to protect the consumer. They were essentially left with nothing," she said.
FTX is a cryptocurrency exchange platform that rose rapidly after it was launched in 2019. However, FTX came crashing down in November 2022.
At first, it appeared to be an accounting oversight but turned out to be a major fraud, and customers and investors lost billions of dollars.
De Wit and Wessels warned consumers to be careful when investing in crypto, saying it is a volatile industry. People can make a lot of money while they can also lose a lot of money.
The FSCA declined to comment.