Stricter regulations on crypto due to scams in South Africa

With the continuous popularity of cryptocurrencies, there are also a lot of scams buzzing around. This is because of the huge amount of money involved with every transaction. With this, South Africa is on the move to impose stricter regulations due to an increase in crypto scams in the past few months.

The new regulatory timeline is said to be released within three to six months. Even though the publication of proposals was submitted earlier in June, it still requires feedback from the public before approval. This is under the instructions of Kuben Naidoo, the Chief Executive Officer of Prudential Authority.

‘We are trying to put in place the regulatory framework quickly. Our view is that crypto is a financial product and should be regulated as a financial product’, Naidoo said.

‘Now we are defining this as a financial product and if there are scams where the public is being duped, given incorrect or false information, it is certainly a market conduct issue that should be taken seriously, he added. This might also include a discussion of whether online casino sites should remain illegal or not.

Based on several records, the country faced the two biggest crypto scams in the world just in 2021. It was reported that nearly $4 billion of investor wealth was wiped off. The first move that the regulatory board plans to do is to establish and maintain proper know-your-customer (KYC) to prevent money laundering. KYC is a process of identifying and verifying each user’s identity. This is to make sure that the users are not committing identity fraud.

The second phase will include investor-protection guidelines and rules to manage all of the possible risks. This also applies to all parties involved in the transaction. The Intergovernmental Fintech Working Group said that all of the crypto assets will be brought into the South African regulatory purview in a structured and phased manner.

The first huge crypto scam happened in January when a crypto trading club called Mirror Trading International promised investors to receive a 10% return. A total of $170 million were taken away.

On the other hand, the second crypto scam took place in April wherein a total of $3.8 billion disappeared together with the founders of Africrypt, an investment platform. The culprits wanted the platform to appear that it was hacked to get away from their crime. What’s interesting is that it is only done by two South African brothers.

According to Africrypt’s lawyers, the founders have terminated their contract as well. This made it difficult for them to track the Cajee brothers.

‘At this stage, we have only found evidence of crypto-asset transactions. Currently, crypto assets are not regulated in terms of any financial sector law in South Africa and consequently, the FSCA is not in a position to take any regulatory action’, the Financial Services Conduct Authority (FSCA) stated.

There are a lot of attempts to contact the Cajee brothers through their mobile phones. However, all of the calls were directed to a voicemail service. The first signs of trouble were first seen when the value of Bitcoin skyrocketed. To lessen the number of crypto scams, the authority warned the public about the high-risk nature of investing in crypto assets.

When it comes to investing in crypto, it is highly recommended to stay away from return percentages that are too good to be true. Just like when choosing an online casino site to bet on, make sure that the exchange, wallet, or company that you’ll be entrusting with your money is licensed and regulated.

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