Why Regulation is Necessary for the Crypto World | DocFox

Written by DocFox | Jul 6, 2021 3:56:57 PM

According to a Statista Global Consumer Survey, South Africa is among the top five countries in terms of cryptocurrency ownerships with 17.8% of respondents indicating they owned or used crypto assets in 2020.

In addition, South Africa is in the top four of the 55 countries surveyed for their adoption of crypto assets. There are around 12 different crypto asset trading platforms operating in South Africa with a market capitalisation value of approximately R6.5 billion.

South Africa’s increasing adoption of crypto assets has the potential to boost financial innovation and efficiency, but the lack of a regulatory framework and the anonymity around it, is an especially attractive option that creates new opportunities for money launderers, terrorist financiers, and other criminals to launder their proceeds or finance their illicit activities.

To address these concerns, the Financial Action Task Force (FATF) introduced amendments to its recommendations firmly placing Anti-Money Laundering (AML) and terrorist financing requirements on virtual assets (VAs) and virtual asset service providers (VASPs).

These amendments place obligations on FATF member countries to “assess and mitigate their risks associated with crypto asset activities and service providers; license or register service providers and subject them to supervision or monitoring by competent national authorities” and includes a requirement under Recommendation 16 (the travel rule) for VASPs to collect and hold information of both the originator and the beneficiary involved in a crypto asset transaction.

While crypto assets are not currently regulated in South Africa, plans are already in motion to bring the country’s AML/ Combating the Financing of Terrorism ( CFT) regime in line with the FATF’s recommendations related to the acquisition, custody, trading and use of crypto assets.

Among the proposed amendments is to include VASPs in the list of Accountable Institutions under Schedule 1 to the Financial Intelligence Centre Act (FICA) , subjecting VASPs to the full weight of FICA regulatory obligations and non-compliance penalties.

This regulatory enforcement should not be viewed in a negative light as with all FATF / FICA regulation, the intention is to stop criminals and prevent financial crime. To add to this FICA compliance doesn’t need to be seen as inconvenient and time consuming. Using tools like DocFox will enable you to onboard new customers quickly, while still meeting all your FICA compliance requirements.

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