I am a fan of regulations and compliance that have reasons and make sense. I am also a fan of "less is more" when it comes to regulation. In that vein I do believe much of our current financial services regulation in South Africa over-corrects to protect investors at the expense of economic activity and innovation. I've written a previous blog post about it that you can find here.
It seems like Crypto is heading the same way if some voices of reason do not speak up. It is not new that a country wants to control or outright ban Crypto. China has banned, un-banned and re-banned it many times over. Other countries have seen the light and provided enabling regulations for Crypto to flourish and grow. Mainstream adoption is growing exponentially in the form of ETF's being issued and even card issuers like Visa joining the party. Some Crypto Exchanges have even listed on major stock exchanges.
So, what have our regulators done so far? They have issued zero final regulations. To their credit, there was a draft regulation on the advice and intermediary services on Cryptocurrencies issued in November of last year. But nothing has been said of that since a year ago. All that happened in the meantime is that the FSCA issued another draft regulation barring Pension Funds from holding Crypto assets. I would assume this includes NFT's (non-fungible tokens) in the form of Art which had sales of $10.7 billion in Q3 of 2021. The Reserve Bank has also reportedly pushed banks to prevent customers from buying Crypto with their cards and from buying Crypto from any company domiciled overseas.
So basically we only have confusion and frustrated businesses. I can't begin to tell you how many Crypto businesses approached us in the last two years to find out how they can comply and get licensed. Unfortunately you can't yet.
I understand that many people have been taken for a ride by Crypto scammers. But, many people have also been taken for a ride by money scammers. Does declaring investing in normal fiat money a crime, solve the problem? No, you but can rather provide trust by licensing exchanges and funds at best. One cannot eliminate all crime by force over-regulation as the criminals will still find ways to do the crime (rather beef up the criminal justice system). What you will accomplish with this heavy handed regulatory approach is overburden those that want to comply en ensure that less people are economically active in this space.
Instead, enable the industry through a measured approach with limited regulation that is both practical and that encourages new entrants to the market.
Blockchain technology is already changing the world and offering better use cases, privacy and trust for all involved. Cryptocurrency is just one use case of blockchain technology and we are at risk of getting left behind if do not create a better space for it to grow.
by: Horizon Compliance team