The South African Reserve Bank (SARB) — the country’s central bank — is purportedly going to impose new regulations for the use of digital currencies in a bid to deter users from evading currency controls.

As local business-focused publication Business Report reported on Dec. 2, SARB’s deputy governor, Kuben Naidoo, said that the new rules will be implemented in the first quarter of 2020, following a five-year-long series of consultations on the matter.

Naidoo’s statements followed a decision of FirstRand Bank — one of the largest financial institutions in South Africa — to discontinue providing banking services to digital currency exchanges in late November. FNB reportedly blamed regulatory uncertainty for the move.

The blockchain and crypto communities have already responded to the idea of further controls on cryptocurrency. South African blockchain development community SA Crypto told Business Report:

“The implications of the Sarb clamping down on cryptocurrency use for the purpose of stricter capital controls are far-reaching and alarming.”

Crypto popularity in South Africa

Cryptocurrencies have proved to be popular in South Africa, with 10.7% of the country’s residents owning crypto, which is the highest of any country surveyed. The South African rand’s volatility, which is one of the world’s most volatile currencies, prompted consumers to seek protection for their money. 

Cross-border payments are a contributing factor of crypto popularity in the country, especially given how remittances are often sent from countries like South Africa to 15 other countries on the continent in what is known as the Southern African Development Community.

In August, major South African crypto exchange Luno saw an average daily trading volume exceeding 80 million South African rand ($5.4 million). Luno saw a significant surge of new customers, reaching a milestone of three million wallets across 40 countries on its platform.

Marius Reitz, general manager for Africa at Luno, said that this indicated increasing global adoption and reinforces the company’s purpose of “reimagining a financial system where money is cheaper, faster and safer with open and equal access for everyone.”

BRICS’s crypto for united payment system

In the meantime, members of BRICS — including South Africa — discussed the creation of a new cryptocurrency at a recent summit in mid-November. The director-general of the Russian Direct Investment Fund Kirill Dmitriev said at the time:

“An efficiently operating BRICS payment system is capable of stimulating settlements in national currencies and ensuring the stability of settlements and investments between our countries, which form more than 20% of the global influx of foreign direct investment.”