How Stablecoins Could Unlock Trade In South Africa

Despite the Intergovernmental Fintech Working Group IFWG publishing a position paper on regulating crypto assets in June 2021, little further tangible progress has been made since then, at a time when other countries are forging ahead with new regulations on blockchain-based digital assets as they realise the potential benefits and positive impact digital assets could have on economic growth and GDP.

While the Financial Sector Conduct Authority FSCA incorporated the crypto asset service provider Casp licensing regime under the Financial Advisory and Intermediary Services Fais Act in 2023 to grant players financial service provider licences, no other material developments have emerged from the IFWG.

However, South Africa's grey-listing by the Financial Action Task Force FATF in February 2023 impacted the existing framework, with the compliance burden now falling on providers to align with FATF on travel, know your customer KYC and anti-money laundering AML regulations.

The failure of the government to integrate the digital asset sector into the formal financial services space and broader economy also represents a missed opportunity to shore up falling tax revenues and reduce the widening budget deficit.

As such, the industry desperately needs more active engagement and tangible efforts from the IFWG to support the adoption and expansion of the utilisation of the asset class with regulations that strike the right balance between stakeholder safety and stability without stifling industry innovation.