Token deposits and crypto assets regulations in South Africa come into effect in January 2025 – Africa Bitcoin News

Regulations on token deposits and crypto assets are expected to go into effect on January 1, 2025, a senior fintech analyst at South Africa’s central bank has revealed. However, according to the analyst, regulators are still trying to understand or learn about the risks that come with using distributed ledger technology.

Central bank considering appropriateness of CBDC for retail customers

Gerhard van Deventer, a senior fintech analyst at the South African Reserve Bank (SARB), recently announced that regulations for the so-called token deposits and crypto assets are expected to come into effect on January 1, 2025. Although this move is on the horizon as a major milestone, Deventer warned that regulators have yet to understand the risks associated with the technology underlying digital assets.

To achieve this, the SARB and its partners conducted experiments aimed at understanding and identifying the risks as well as the benefits of distributed ledger technology (DLT). Project Khokha and Project Khokha 2 are among the experiments conducted by the South African Central Bank in conjunction with commercial banks.

In one of the experiments, the SARB is said to have examined a digital currency issued by the Universal Central Bank of Retailers (CBDC). South Africa’s central bank has similarly explored wholesale and multi-CBDCs, and Deventer says the bank is now interested in finding a way forward.

“At SARB, we recently completed a project that assessed the feasibility, desirability and appropriateness of a retail CBDC for South Africa. We are currently moving forward with an internal project to consider how to proceed,” said the fintech analyst.

According to a report published in Creamer Media’s Engineering News, South African regulators; the SARB and the Financial Sector Conduct Authority (FSCA) as well as the financial industry still need to work more on the regulatory treatment of crypto assets.

Advantages of a central bank digital currency

Meanwhile, the same report also quotes Standard Bank’s Chief Executive (CE), Sim Tshabalala, who recently spoke about the benefits of using CBDCs to facilitate secure interbank clearing. According to Tshabalala, CBDCs, especially in retail, can potentially increase participation in the formal financial system. You can also reduce opportunities for tax evasion and other forms of financial crime.

However, Tshabalala noted that questions remain about the role of central banks should CBDCs become widespread. He said:

“At this time, however, it is not clear how retail CBDC balances held with commercial banks differ from other deposits, or how CBDC balances held by an individual or corporation directly with the central bank differ from that of the central bank transformed into a retail bank.”

Standard Bank CE said not addressing this would be doing nothing to “mitigate the risks and moral hazard” that arise from a central bank’s direct involvement in the financial system.

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Terence Zimwara

Terence Zimwara is an award-winning Zimbabwean journalist, author and writer. He has written extensively on the economic woes of some African countries, as well as how digital currencies can provide an escape route for Africans.