South Africa Cracks Down on Crypto Flows in Bid to Stay Off FATF Greylist

The South African government has introduced new proposals to strengthen oversight of financial activities and curb emerging risks associated with virtual assets. The Treasury and Reserve Bank have published a draft crypto asset manual, which sets out the application and adjudication process for authorisation to conduct business as an authorised Crypto Asset Service Provider (CASP).

The move comes as South Africa seeks to demonstrate its ability to prosecute and stop illicit financial flows after exiting the Financial Action Task Force (FATF) greylist in October last year. The FATF had placed South Africa on the list in February 2023 over significant weaknesses in its system to combat money-laundering and terrorist financing.

The Reserve Bank does not recognise cryptocurrency as legal tender but has warned that such assets pose a danger to the stability of South Africa’s financial system. The draft regulations propose that an authorised CASP may not buy, borrow, receive, sell, lend or deliver crypto assets except for purposes or on conditions determined by the National Treasury.

The new rules aim to bolster South Africa's position as a financial hub for the continent and attract more investor capital. However, the Reserve Bank governor Lesetja Kganyago acknowledged that finding a balance between limiting the dangers of digital technology and stifling innovation is not easy.