A draft copy of a document outlining South Africa’s response to the rise of cryptocurrencies illustrates that although the threat of an outright ban is minimal, the SARB’s intentions represent a clear and existential threat to the anonymity of crypto assets in the country.
– South Africa’s Reserve Bank recently published a consultation paper, the gist of which spells out the planned de-anonymization of crypto-asset transactions.
– In typical “if you can’t beat it, attempt to hijack it” fashion, the SARB’s move would turn cryptocurrencies into the perfect Big Brother financial surveillance tools.
– Just how far can the government push this worst-possible approach to regulation though – in technical terms?
The road to mass adoption leads through regulation.
Even most crypto buffs agree, there is no getting around this basic tenet.
The SARB report appears to hold a glimmer of hope at first glance:
“South Africa does not currently intend to ban the buying, selling or holding of crypto assets, or to ban crypto assets for payments.”
Rather than being just another variable in the formidably intricate equation of mass adoption though, regulation may in fact be its most important piece and most difficult-to-overcome obstacle. The document soon turns:
It is recommended that the following entities are registered at a central point, as stipulated by the Crypto Assets Regulatory Working Group of the IFWG:
a. Crypto asset trading platforms, and vending machine owners and providers.
b. Crypto asset digital wallet providers.
c. Crypto asset safe custody service providers (custodians).
d. Crypto asset payment service providers.
e. Merchants and service providers accepting payments in crypto assets.
Hoping that the establishment would play along fairly is perhaps the equivalent of living in a fool’s paradise, and – as showcased by the intentions of the SARB – the current financial system is now gearing up to fight back on its own terms.
What this means in practical terms is that these crypto industry actors would be required to:
– observe strict KYC and AML policies – including full client identification (name, address etc.)
– fully monitor client transactions (knowing what people do with their crypto assets, how much they spend/buy and how).
– report all “suspicious” transactions, the fiat value of which exceeds R25,000 (~USD 1,824), to the authorities.
While the above would only impact crypto-connected services, the ambitions of the working group that came up with the plan – which, besides the SARB, also includes the National Treasury, the Revenue Service, the Financial Intelligence Centre and the Financial Sector Conduct Authority – apparently also extend to the full de-anonymization of cryptos in general.
It is worth noting that South Africa’s financial authorities do not consider cryptos (including BTC) to be currencies. According to their current classification, they are considered securities and thus subject to the full authority of the above listed entities.
The Taming of Bitcoin
While the working group acknowledged the legitimacy of the cryptosphere as an “important fintech innovation”, it nonetheless did not shy away from striking a direct blow against the very essence of the innovation that it provides.
As expected, the potentially game-changing measures were yet again justified through consumer protection and fraud prevention, though they would obviously serve the authorities well in regards to taxation and the tracking of user transactions too.
If adopted and implemented, there’s little doubt the proposed moves would turn BTC and its ilk squarely against the very principles upon which their current existence is predicated, molding them into the most powerful tools a banker has ever wielded.
Comments on the paper can be sent to [email protected], until February 19, 2019.
The author is invested in Bitcoin, which is mentioned here.