south africa halts crypto investment

South African Finance Minister Aims to Halt Pension Funds Investing in Cryptocurrency

Enoch Godongwana, South African finance minister, has proposed that pension funds are prohibited from investing in cryptocurrency. He also set November 12th as the deadline for public comments.

Cryptocurrency a Grey Area

Business Insider SA reports that Godongwana has set a time frame for public comment to the draft proposals. This suggests that he wants to see the changes take effect before the end the year.

Before Godongwana’s proposals South African pension funds considered cryptocurrency a gray area that allowed for up to 2.5% investment in assets. The Business Insider reports that this part of the regulations that allowed pension funds to legally invest cryptocurrencies will be removed when the minister’s changes are approved.

The report stated that a [pension] fund cannot invest in crypto-assets either directly or indirectly, citing new rules in a government document.

The draft proposals of the finance ministry suggest that Godongwana also wants to broaden the definition of cryptocurrency to include derivatives like non-fungible tokens, NFTs, and any other digital assets not issued by central bank. The report outlines Godongwana’s proposed definition for cryptocurrency.

“Crypto-asset” is a digital representation value that is not issued or controlled by a central bank but can be traded, transferred, stored, and transferred electronically by natural and juridical persons for payment, investment, and other utility purposes. It uses cryptographic techniques and distributed ledger technology.

South African Regulators Are Trying to Find the Right Framework

The report notes that Godongwana’s determination not to allow pension funds to invest in cryptocurrency comes at a time when South African regulators are trying to establish the right framework to regulate the industry. In June 2021, South Africa’s Intergovernmental Fintech Working Group released its position paper, calling for regulation of the country’s cryptocurrency ecosystem.

South African Revenue Services had made significant changes to its online tax filing system, in an attempt to target cryptocurrency arbitrage traders.

Godongwana’s ministry uses similar arguments to back its draft proposals, just as other South African regulators have used consumer protection concerns to justify their actions against cryptocurrency. The ministry claims that the proposed changes will protect retirement funds by limiting their investment in certain assets or asset classes.