The SA Reserve Bank (SARB) says foreign-exchange controls will soon apply to crypto-currencies such as bitcoin, while all crypto asset service providers will need to apply for a special licence from the Financial Sector Conduct Authority.

A Business Day report says these pending new requirements form part of the second phase of SARB’s blockchain case study for central banking, dubbed Project Khokha, which began after the establishment of the bank’s fintech unit in August 2017.

‘Responsibility for complying with the proposed regulations will, in the main, be imposed on the crypto asset service provider,’ said Herco Steyn, a senior fintech specialist at the SARB.

‘For example, if they want to do cross-border remittances using crypto assets, they will have to be appointed for that purpose by the financial surveillance department of the SARB,’ Steyn said.

‘The requirements in this regard will, for the most part, be imposed on the crypto exchange to verify that individuals do not send crypto assets abroad, or in other words, expropriate value from SA in contravention of the exchange control regulations via crypto assets,’ he said.

Steyn said it has been a challenge to figure out how to reconcile crypto assets – which are by their nature digital, borderless and not tied to any particular country – with SA’s foreign-exchange control regulations.

Nevertheless, he said, the bank has ‘a very sound idea of how to amend the existing exchange control regulations and associated manuals to appropriately cater to crypto assets’.

Full Business Day report (subscription needed)