The South African Cryptocurrency Sector is likely to adopt methodology of a Crypto self regulation.
The South African Reserve Bank (SARB) has assembled the best of people as its team to look after the fintech developments and also assist its efforts to finalize the regulatory schemes for cryptocurrencies. For the same, crypto self regulation various representatives from the private sector have proposed the creation of a Self-regulatory Organization (SRO). Because banks falls within the central bank’s jurisdiction, therefore cryptocurrencies are not suited to traditional centralized supervision.
Bridget King, Finance and Banking Practice Director at a leading South African law firm, said,
“Regulation through self-regulatory organizations may be a more likely solution,”
She explained the SRO can be registered as a non-governmental body that is authorized to adopt rules, issue certain directions and instructions for its members while also applying industry standards.
Mrs. King believes that the central bank should take the responsibility of dealing with preventing systemic risk, while coordinating with SRO that can establish a self-regulatory approach in the fintech sector for crypto self regulation. She also warned that regulating cryptocurrencies a little earlier than their time could suppress growth and innovation in the industry. But this aproach would have to be balanced.
“If laws are drafted based on existing technology, which is still in its growth phase, there is a risk that the technology may have moved so much by the time the legislation is enacted, that this legislation is obsolete or requires updating almost immediately”
Meanwhile, SARB has also been exploring opportunities to implement distributed ledger technologies in electronic payments. It is also running the experiments replicating interbank clearing and settlement using the Quorum protocol, a permissioned implementation of ethereum.
Bitcoin has been steadily gaining popularity in South Africa. Trading has increased significantly, so has the use of cryptocurrencies as a means of payment. Thus, the methods adopted for crypto self regulation align well with both government and the people.
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