The South African Reserve Bank (SARB) is planning to bring new laws controlling digital currency in a bid to stop its users from evading currency controls.
Reported by the Business Report on Monday, Kuben Naidoo, the deputy governor of the SARB, last week revealed that the new rules would be enforced in the first quarter of next year.
Discover iFX EXPO Asia 2020 in Macao – The Largest Financial B2B Expo
The upcoming rules will primarily put a restriction on the amount of South African rand that can be allowed to be sent outside the country by both individuals and companies.
Creating a closed economy?
Currently, the central bank allows its citizens to send 1 million rands (around $68,200) across the border without any declaration, while for foreign investment purposes, the limit is set to 10 million rand (almost $681,800), but permission from the South African Revenue Service is needed for this.
Due to these restrictions, many are utilizing cryptocurrencies to transfers funds from South Africa to foreign countries.
The announcement of the central bank had already created an environment of tension with the crypto businesses operating in the country and also the financial institutions in business with such companies.
First National Bank (FNB), a local bank in the country, had already closed all its ties with crypto businesses for which it was providing business banking accounts.
“FNB considers this to be a prudent course of action following a comprehensive review of the potential risks currently associated with these entities, particularly given that appropriate regulatory frameworks are not yet in place,” the bank said in a statement.
The crypto companies operating in the country are now in stress as AltCoinTrader, one of the clients of FNB, stated: “We are disappointed that a financial institution would succumb to international pressure like this, with banking services being denied to individuals and industry players around the globe.”
Earlier this year, the South African authorities formed a working group to study digital currencies and also mandated the registration of crypto businesses.