Treasury to revise crypto rule proposals after draft elicited 'thousands' of comments

Amid all the announcements in the Medium-Term Budget Policy Statement (MTBPS), Finance Minister Enoch Godongwana also opened the way for a new approach to the cross-border treatment of crypto assets . RELATED: Godongwana makes big announcements on fuel relief, oversight of municipalities, fiscal anchor This follows the release of draft capital flow management regulations for public comment, which the Minister said elicited "thousands" of comments.

The proposed framework would have required crypto asset service providers facilitating cross-border transactions to obtain approval from the Reserve Bank's (SARB) Financial Surveillance Department. Opposition from the country's cryptocurrency players was so strong that they launched the ‘Catastrophe’ coalition which campaigned to highlight how restrictive cross-border regulations could harm the crypto industry and the national economy.

RELATED: Crypto industry forms coalition to fight proposed exchange control rules Presenting the 'mini budget', Godongwna said it was clear they have to take a different approach to these amendments. "We must aim to shift away from pre-approvals. Instead, we must assess transactions for legitimacy and tax compliance." He said a consultation process would be started, with the aim of publishing a revised second draft of the regulations for further input.

Stephen Grootes gets comment from Marius Reitz, General Manager for Africa at crypto management platform Luno. Treasury needs to be applauded for taking the feedback from the crypto industry and also the broader financial services sector into consideration, Reitz remarks. "(They need to be applauded) for essentially placing this process on hold to ensure that what is implemented is in the best interest of South Africa, and that it strikes a balance between innovation and ensuring that the financial system is also safe and secure." He says it is useful to take a step back and also consider what is happening globally in this space.

"The way in which money moves cross-border has become easier, cheaper and faster at a global level. And the rate of adoption when it comes to digital assets like stablecoins, for example, has been on the rise." Treasury moving forward with the draft regulations would have made South Africa an outlier, Reitz says.

"I think a lot of the early gains that we made through the financial sector conduct authority, would have been lost to us as an industry." To hear more from Reitz on the cross-border treatment of crypto assets, listen to the interview audio at the top of the article