KEY POINTS
- South Africa will study the applicable use cases of stablecoins in the financial system
- It is already considering the "impact of tokenization on domestic financial markets"
- It will also look into the regulatory implications of a "blockchain-based" financial system
South Africa's National Treasury on Thursday published its 2024 budget review, highlighting the need to "promote the adoption of digital payments," and among the steps it will take this year is to analyze possible use cases of stablecoins and tokenization.
In its 2024 budget review, the Treasury said the government is "taking steps to promote the adoption of digital payments, which will help to improve the lives and livelihoods of marginalized groups."
As part of South Africa's aim of transforming its financial infrastructure into a digitalized system, the Intergovernmental Fintech Working Group, which includes several South African financial sector regulators, will publish additions to a 2021 position paper "to include 'stablecoins' as a particular type of crypto asset."
The group will also conduct "analytical work to understand the applicable use cases of stablecoins and to recommend an appropriate policy and regulatory response." Finally, the group will finalize "a diagnostic of the domestic stablecoin landscape" and provide regulatory recommendations aligned with international guidelines.
Tokenization is also another aspect of digital transformation in the financial sector that South Africa has its eyes on. The group is already "considering the impact of tokenization on domestic financial markets." It is expected to produce a discussion paper at the end of 2024 that provides information on policies and "regulatory implications of tokenization and blockchain-based financial market infrastructure."
The Treasury also announced that South Africa has collaborated with Switzerland's State Secretariat for Economic Affairs and nonprofit independent FinMark Trust for interventions to help foster an inclusive payments digitalization program. The initiative, which includes four digital payments pilot projects, will be implemented within the next three years.
Among the projects under the initiative is community digitalization, which aims to encourage small enterprises to accept and utilize digital payments.
While South Africa is taking more steps to revolutionize the country's digital payments sector, it has also committed to increasing enforcement of rules this year against "unlicensed service providers" of cryptocurrencies.
As per the Financial Intelligence Centre (FIC) Act, accountable institutions should report all cash transactions over R49,999 to the FIC. The authorities will consider measures to extend this requirement to crypto transactions.
