The Intergovernmental Fintech Working Group (IFWG) in South Africa is poised to publish an updated position paper that will categorise stablecoins as a distinct form of crypto asset.
This development follows the IFWG’s initial 2021 position paper, which proposed 25 recommendations for regulating crypto assets in South Africa.
Stablecoin Use Cases Under Scrutiny
In addition to classifying stablecoins, the IFWG intends to conduct analytical research to identify the applicable use cases of stablecoins. This forthcoming document will provide a detailed regulatory stance and policy recommendations regarding stablecoins in the South African context.
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Policy and Regulatory Response to Stablecoins on the Horizon
Following the Financial Sector Conduct Authority’s (FSCA) designation of crypto assets as financial products in November 2023, in line with the IFWG’s previous recommendations, the IFWG is expected to propose an appropriate policy and regulatory response to stablecoins. These proposals will be crafted to ensure alignment with global standards and best practices.
IFWG’s Examination of Tokenization’s Impact on Financial Markets
The IFWG is also actively examining the potential impact of tokenization on South Africa’s domestic financial markets.
According to the National Treasury 2024 Budget Review, “The IFWG is considering the impact of tokenisation on domestic financial markets. By June 2024, a paper providing an overview of tokenisation will be published. By December 2024, a discussion paper will be published that outlines the policy and regulatory implications of tokenization and blockchain-based financial market infrastructure.”
The IFWG’s efforts to regulate crypto assets and explore tokenization demonstrate South Africa’s commitment to embracing fintech innovation. By providing clarity and guidance, the IFWG can help unlock the potential of these technologies to drive economic growth and financial inclusion. As South Africa continues on its fintech journey, the IFWG’s role will be instrumental in shaping a future where digital assets and blockchain technology play a central role in the financial system.