Crypto Businesses In South Africa To Become 'Accountable Institutions'

South Africa has now categorized crypto businesses as "accountable institutions" and just like banks, they have to follow KYC standards.

As per a new amendment to the Financial Intelligence Centre Act (FICA) annexure, passed Tuesday by South Africa's Finance Minister Enoch Godongwana, crypto service providers will come under the list of "accountable institutions" from Dec. 19.

The amendment comes after the country's financial regulator officially classified crypto assets as financial products in October.

"Some level of regulation can be tolerated, especially after recent events with Alameda and FTX," Daryl Naidoo, the founder of South Africa-based crypto and blockchain consulting firm Promethean Dynamics, told International Business Times. "As long as regulations are put in place to serve the average man on the street instead of serving the interests of the traditional finance sector (the reserve bank and the banking industry as a whole), then it's okay."

The latest move comes after the Financial Action Task Force (FATF)'s warning about the country's cryptocurrency regulations. The international watchdog highlighted gaps in the country's laws that could allow terrorist financing and money laundering.

If South Africa hasn't taken the action to address the issue, it could be at risk of being greylisted – which complicates business processes with other jurisdictions.

The amendment is expected to "enhance anti-money laundering, combatting the financing of terrorism and countering proliferation financing supervision and monitoring."

However, financial services behemoth KPMG, in a news release, said risks relating to regulatory amendments could be one of the biggest concerns for business figureheads.

Naidoo said some of South Africa's lawmakers lack knowledge about cryptocurrencies and their technology.

"Unfortunately, some of the crypto regulations put in place by SA lawmakers only highlight how little they understand about the technology. They need to learn more about the technology and the industry before they try to regulate it," he told IBT.