Kuben Naidoo, vice president of the South African Reserve Bank (Sarb), said a few things in an interview with PSG on July 12, and the financial industry was eye-opening. Some sighs of relief, some gasping of horror, a little bit of a headache, but mostly cautiously optimistic, as everyone is waiting for the comments to be translated into actual regulations and produce results. I had high expectations.
I wrote Before Especially about the roaring dogs of global regulation that come after the crypto, after the deafening sound of the recent global crash of the crypto that saw dominoes fall everywhere. When I wrote the piece, Saab said almost nothing — their ideas were closely kept secret.
It’s easy to declare Sarb to be just another dysfunctional SOE, and its decision on cryptographic regulation is logical, with little information or logic, as found elsewhere in government regulation. It’s easy to imagine that it’s justified. Regime.
But that’s not the case. I know people from within the South African crypto community who have interacted with Saab and contributed to that idea on this issue. The South African Reserve Bank team considering cryptography is competent, wise, cautious, and well-informed.
But first, let’s smash a horrifying fuss from the Vice-Governor. He said “my counterpart in the United States” told him that “90% of cryptocurrency transactions” were being used for illegal purposes. He went a step further: “Most cryptographic use cases around the world were not honest.”
This is a laptrap. A joke. Shit. It then becomes a news headline, providing the worst false information that can cause immense damage to important new industries.
Actual statistics are continuously collected and reported by a number of data analysis companies. The largest and most prestigious of them is Chainalysis, which is used by the FBI and forensic, surveillance and regulatory authorities around the world.
The number of crypto transactions related to fraud on the blockchain is 0.15%. Point One Five Percent.
Someone is I want to confirm this, so please see here..
In addition, the number of transactions related to illegal transactions in the real land and dollar world we live in is 5%. This is 50 times more than cryptocurrencies (and they are the only ones we know).
Why is this? This is because blockchain transactions are public. It is impossible to commit a crime of silence. It appears instantly and it’s easy for anyone to track cryptocurrency earnings.
In the so-called “fiat money” world, the physical world in which most of us live, it is often easy to hide financial crimes. Look at what they continue to discover in dangerous financial shelters like Panama. Cryptography is not an easy place to steal and store money.
The Vice-Governor was so misunderstood about the matter that he should have been more cautious.
But let’s get back to the regulatory comments. He said the South African Reserve Bank intends to regulate cryptocurrencies as “financial assets.” This means that it is in a basket of cash, stocks, bonds, investment trusts and bank deposits. He said it would be under the steel-like line of sight of the FIC (Financial Intelligence Center). He said it would take 12 to 18 months for the government to do whatever it needed. That means understanding and approving the necessary changes to proper action (uh).
This creates at least early certainty. That’s a good thing. Institutions like banks can now initiate plans and plans to enter this area of assets and services (and believe me, they will). The tax issue becomes clearer. The impact of KYC and AML becomes clearer. Forex regulations change from ambiguous to less ambiguous.
A bigger problem is imminent
But it’s not that fast. There is a much bigger problem looming, which will cause Saab and others to spend more difficult time. And here’s the reason.
When people think of “cryptography”, they think of Bitcoin and perhaps some decide that it is a financial asset. Perhaps there are some rational arguments for that. But Bitcoin is just one token in the huge universe of crypto tokens. Cryptocurrency, NFT, loyalty tokens, governance tokens, staking tokens, utility tokens, non-transferable tokens.
The true Babel of tokens.
And even if market value can only be generated by an agreement between two private bodies, some are certainly not financial assets.
It leads me to this. The South African Reserve Bank (and all other regulators) is trying to do an existing design decades ago for assets (stocks, currencies, commodities, collectibles, etc.) hundreds of years ago. Is to push cryptocurrencies into the regulation of. It does not work. Before we can reasonably regulate the entire field, we need to properly define a whole new class of digital “things.”
A simple example will suffice. The world of blockchain and NFT has recently clashed with the world of video games. In some games, you can buy and own in-game weapons or other items, connect them to your NFT, and sell them to another player in your video game (or another video game). Is Sarb trying to regulate the Digital Silver Power Sword in a video game played by a 14 year old kid?
If so, the bucket leaks in so many places that it cannot hold water. DM
Steven Boykey Sidley is a professor at the University of Johannesburg JBS and Beyond Bitcoin: Decentralized Finance and the End of Banking..