South Africa announced plans to weave digital payments and crypto into its financial fabric to boost the economy for marginalized groups.
The announcement was made in the country’s 2024 budget and underlines the government’s drive to build a digital economy through active collaborations between public and private sectors to enhance financial innovation.
The budget targets enhancing access to digital payments for people in townships and rural areas who predominantly handle cash. Initiatives will provide local merchants with the infrastructure needed for digital transactions, like internet connectivity and point-of-sale systems.
Starting with a pilot in Gauteng, these efforts seek to broaden the acceptance and use of digital payments among both consumers and businesses.
Regulatory Standards
South Africa intends to legitimize crypto payments and make them an intrinsic part of the local economy over the coming years, starting with a regulatory framework for the sector. The country made crypto an official financial product in 2022, akin to company shares or debt.
The Intergovernmental Fintech Working Group (IFWG) will start issuing comprehensive guidelines in 2024 that will focus on “stablecoins” and their practical applications. This effort will complete a thorough review of the stablecoin environment domestically and create regulatory recommendations that align with global standards.
In 2023, the Financial Sector Conduct Authority (FSCA) and the Financial Intelligence Centre (FIC) started to register crypto asset service providers, following changes to the FIC Act that align with FATF recommendations. The FSCA’s classification of crypto as a financial product now requires service providers to obtain a license, ensuring they meet strict operational standards.
The government is reviewing the extension of the FIC Act’s mandate, which currently requires reporting cash transactions over R49,999, to include crypto transactions. The move aims to use such data in fighting crime.
Additionally, the government intends to explore tokenization and how blockchain technology can represent assets, with the publication of policy and regulatory implications planned for December 2024.
The South African central bank has been considering the development of a central bank digital currency (CBDC) for a number of years. However, the regulator has yet to announce any significant progress in the area.
Supporting financial inclusion
The National Treasury and the Reserve Bank, together with international partners, are rolling out four pilot projects focused on digital payments to aid small and informal businesses.
These projects aim to digitize community transactions, informal worker payments, and cross-border remittances to facilitate finance for small traders engaging in cross-border commerce. Each initiative addresses specific hurdles, from cutting remittance costs to implementing digital tipping for low-income workers.
These efforts highlight South Africa’s determination to be at the forefront of financial digitalization and inclusion, using technology to strengthen its economy and uplift its people. By integrating crypto and emphasizing a solid regulatory framework, the country shows a progressive approach that ensures innovation goes hand in hand with consumer protection and financial integrity.