The Financial Intelligence Center (FAFIR) in South Africa has confirmed that crypto and stablecoins are not legal tender. Authorities agreed that crypto is becoming a growing part of the nation’s financial system but stuck to their ruling.
For this, South African Reserve Bank (SARB), and the Financial Sector Conduct Authority (FSCA) made a joint statement. They said crypto assets are neither money under South Africa’s National Payments System (NPS) Act nor funds. In plain words, it means they cannot currently be treated as legal tender. The regulators also said the country is doing analytical work to evaluate the regulatory framework for crypto assets as a payment medium.
South Africa Doesn’t Consider Crypto Legal Tender Despite Adoption
The guidance follows the growing trend of citizens in South Africa adopting cryptocurrencies. They are increasingly using stablecoins and other crypto for payment, transfers, investments, and savings, the country’s officials acknowledged.
Recently, South Africa’s exchange control policies have been questioned by economist Dawie Roodt. He has stated that the exchange control framework is obsolete and incompatible with the current capital flows in South Africa. Further, Roodt said that people are likely to turn to digital assets rather than the rand if the government does not modernize its rules.
Still, regulations maintain that crypto cannot currently be used as a legal payment in the country’s financial system.
Why It Matters
The ruling against cryptocurrencies could have an impact on the efficiency of the South Africa National Payments System. Moreover, it could even affect financial stability in general.
To address these concerns, the NPS Act proposes to extend the regulatory sphere of the NPS. According to the statement, “The revision of the NPS Act will include provisions that would enable the SARB, at its discretion, to declare and regulate payment instruments other than money, such as crypto assets.”
The regulators added, “Among other aspects, this will provide the SARB with the authority and discretion, should a compelling case arise, to designate crypto assets as payment instruments for domestic transactions.”
The move may provide SARB with more room to regulate new payment methods like crypto. This would still enable them to control the nation’s financial infrastructure.
Interesting News: Bitcoin Court Ruling Gives BTC Official Money Status In South Africa
South Africa Studies Stablecoins For Payments
In South Africa, the central bank is not currently planning to regulate “unbacked” cryptocurrencies as payment instruments. However, this might not apply to stablecoins.
The regulators in South Africa stated that stablecoins exhibit traits of digital money and thus “have the potential to be adopted as a payment instrument.” This has led to the Intergovernmental Fintech Working Group (IFWG) exploring the potential for stablecoins pegged to the South African currency. They noted that they will inform the public of next steps in policy making.
On the contrary, foreign currency-based stablecoins for domestic use are not likely to go past the approval stage in South Africa. Regulators warn that a set of assets could lead to“may result in the risk of currency substitution (‘dollarization’), which would weaken the monetary policy transmission.”
Also Read: Africa Crypto Market Eyes Major Partnerships On Stablecoin & Compliance
