South Africa prepares new rules to stop crypto from being used to evade currency controls
Reserve Bank of South Africa is planning to introduce a new rule regarding the use of crypto, in a bid to stop their use to evade currency controls. The rules are expected to be put in place by Q1 2020.
Local banks such as FNB have already started clamping down on virtual currency companies. Last week FNB closed all business banking accounts for companies dealing in cryptocurrencies.
Reason: Bid to control money leaving the country.
Africa’s second-largest economy barely sidestepped a second recession in two years in the second quarter of 2019. The World Bank has cut South Africa’s growth forecast for 2019 through to 2021, citing weak investor sentiment.
Individuals increasingly are looking to protect their wealth against the rand’s devaluation, weakening economy, and policy uncertainty. Now individuals and companies are largely moving their money out of the country and investing abroad.
To control the situation, the Reserve bank puts a limit on the amount of money an individual can move out of the country. Currently, South African citizens can send up to 11 million Rand outside of the country. Of this amount, 1 million Rand does not require any declaration. For the remaining 10 million Rand, citizens require prior approval from the South African Revenue Service.
As a result of these limitations, an increasing number of South Africans are researching their options on how to move money safely offshore.
This leaves cryptocurrency as the most popular method of sending money anywhere in the world. South African’s love for cryptocurrencies and Bitcoin is also apparent from the Google trend results.
Community reaction:
South Africa’s largest blockchain community, SA Crypto, said it had previously written to the Reserve bank urging to adopt progressive statutes when approaching crypto assets. As per SA Crypto, conservative regulations would not only hinder innovation in South Africa but also repel investment into the country.
