SA traders expect more regulation as Bitcoin rally continues
South African crypto-currency players believe the surge in the price of Bitcoin will attract greater regulatory interest.
This as Bitcoin, the world’s most popular digital currency, has breached the $1 trillion market capitalisation mark for the first time.
At the time of writing, Bitcoin was trading at a record $56 000 (R831 000). The massive surge in the price of Bitcoin was recently propelled after South African-born Elon Musk’s Tesla bought $1.5 billion in the crypto-currency.
The company has also indicated it will, in future, start accepting Bitcoin as a payment method. Other big-name companies that have embraced Bitcoin include the likes of PayPal, Mastercard and Square.
“The rise in value brings more people into the market and is, therefore, likely to attract greater regulatory interest,” says Marius Reitz, Luno GM for Africa.
“Regulation in South Africa has been a focus of the South African Reserve Bank for a while now and we have worked with the Intergovernmental Fintech Working Group. Regulation ultimately brings clarity and protection to businesses and consumers, so we are in favour of it.”
Earlier this month, SA’s big four banks were selected by the central bank among the entities that will be trialling Project Khokha 2, a proof-of-concept project which aims to explore the use of digital currency, blockchain and tokenised money in SA.
Farzam Ehsani, CEO and co-founder of VALR, comments that the regulatory roadmap in SA has already been set.
“VALR has been engaging with the regulators on a regular basis and recently the FSCA [Financial Sector Conduct Authority] made a draft declaration of crypto assets as financial products.
“We have provided our comments to the regulators and look forward to a measured and appropriate regulatory framework to benefit the people and regulators of South Africa,” Ehsani says.
Likewise, Sean Sanders, CEO and co-founder of Revix, strongly believes higher prices will lead to faster regulatory developments in SA.
“When you have an asset class expand by over $1 trillion (R15 trillion, or roughly 2.5x South Africa’s annual GDP) in the space of 12 months, like what you’ve seen with crypto, you have new businesses that emerge and more money to be made in the sector.
He notes this puts pressure on regulatory bodies to step up so that the sector can continue to grow and tax authorities can get their share of the pie.
“Additionally, the regulatory bodies are incentivised to do so through increased registration and due diligence-related income and so usually more funding is allocated to personnel and technical talent specialising in crypto assets,” Sanders says.
Meanwhile, crypto traders say with the critical South African budget statement looming this week, the rand has seen a significant slowdown against the dollar in the rally it experienced over the previous weeks.
They point out that these recent gains could also be associated to the stock market and commodity markets rally which typically favour emerging marketing currencies.
“The ZAR is potentially more exposed to some profit-taking ahead of the presentation of the South African annual budget on 24 February,” says Roberto Mialich, FX strategist at UniCredit Bank.
He adds that with so much focus on the budget, it’s little wonder that South Africans are diversifying their savings and investments into alternative funds and assets such as Bitcoin in an attempt to mitigate risk.