South African Reserve Bank (SARB), the country's central bank intends to implement new rules that will prevent the use of cryptocurrencies to evade currency controls. Also, South Africa’s First National Bank, a local bank in the country has revealed that it will stop serving cryptocurrency platforms like Luno, according to Iol's report on December 2, 2019.
SARB to Implement New Cryptocurrency Rules
Per the report, SARB is seriously looking to introduce new rules that will restrict the use of cryptocurrencies to bypass currency controls. Reportedly, Kuben Naidoo, SARB's deputy governor revealed that the new rules will be implemented in the first quarter of 2020. And the implementation will end the consultations that began since 2014.
Further reports reveal that the new rule is a "foreign exchange control" that will affect the amount of money that can be sent abroad. Currently, individuals and companies in South Africa are only allowed to transfer 11 million Rand (about $750,00) abroad for foreign investment purposes. In this case, 1 million Rand (about $68,000) can be sent across the border without declaration, while 10 million Rand (about $682,000) requires that a special application to the South African Revenue Service (SARS).
South Africans Resort to Cryptocurrency Due to Limitation
On the other hand, this limitation has caused individuals and companies in the country to look for alternatives to send money abroad. And one of the feasible means is the use of cryptocurrencies. Similarly, South Africa barely escaped a second recession that could have occurred after economic growth rebounded in the Q2 of 2019.
The falling rates of the country's fiat, Rand, as well as policy uncertainty, and the weakening economy has made individuals and companies seek greener pastures overseas. As such, several people have chosen to invest abroad, while others are using cryptocurrency as a safe haven for holding the value of their assets.
South African's Reaction to the Central Bank's Policy
South Africans have aired their views on the central bank's intention to enact rules targeted to the use of cryptocurrencies. SA Crypto, the largest South African crypto community, opined that the SARB's regulations are conservative.
According to SA Crypto, the implementation of these rules will hinder innovation and repel potential investors into South Africa. The group also noted that it had written to SARB in a bid to encourage the regulator to adopt progressive statutes when it comes to cryptocurrencies.
SA Crypto also said:
“With a market cap of $210 billion (R3.07 trillion) in the cryptocurrency market alone, the industry is driving significant economic growth in countries adopting such progressive regulation, due to the investment many blockchain and crypto asset companies are attracting worldwide."
Local Bank in SA Plans to Block Luno and Other Crypto Companies
Asides from the central bank's action, local banks in South Africa have revealed their plans which could affect how cryptocurrency companies offer their services to South Africans. The First National Bank (FNB), for instance, stated in November 2019, that it will stop serving local cryptocurrency exchanges including Luno.
Luno, on the other hand, is a cryptocurrency platform that enables users to buy and sell Bitcoin and Ethereum with/for Cash. Other companies in the crypto space that the FNB revealed it will also stop serving include ICE3X, and VALR.
Explaining the FNB's intention, Marius Reitz, Luno's Africa general manager said:
"We can confirm that FNB has decided to close our account with effect from end March 2020, along with other crypto exchanges in South Africa...We do not anticipate any impact to our existing customers as we have other banking relationships in place to support deposit and withdrawals on the platform.”
Africans Show High-Level Interest in Cryptocurrency
Despite these attempts to reduce the people's interest in cryptocurrencies, Google Trends shows that South Africa is one of the top countries interested in bitcoin. The country comes in second after Nigeria, a West African country.
On the same note, the peer-to-peer cryptocurrency website Paxful revealed that it has added 80,0000 more wallets within the past 12 months as a result of growth driven by African countries like Nigeria, Ghana, and Kenya Likewise, the Economic Community of West African States (ECOWAS), a 15-member-country also intends to introduce a digital currency called Eco in 2020.