Enoch Godongwana, South Africa’s finance minister, has presented proposals that prevent pension funds from investing in cryptocurrencies, while also setting the deadline of the public comment on the draft proposal to November 12.
The deadline on the public comment suggests Godongwana intends for the changes to be made before the year comes to an end.
Prior to this, The South African pension funds had considered cryptocurrencies a grey area – even before Godongwana’s proposals – where an investment of up to 2.5% of assets held was permissible.
The proposed changes by the minister seek to remove the ambiguity of that part of the regulations which pension funds use to legally invest in cryptocurrencies.
In the draft proposals of the finance ministry, there are hints that Godongwana is also seeking to expand the definition of cryptocurrencies to include derivatives such as non-fungible tokens (NFTs) as well as any digital asset that is not issued by central banks.
The definition of cryptocurrencies, according to Godongwana in a statement, read thus:
“Crypto-asset’ means a digital representation of value that is not issued by a central bank, but is capable of being traded, transferred or stored electronically by natural and legal persons for the purpose of payment, investment and other forms of utility; applies cryptographic techniques and uses distributed ledger technology.”
The report shows that the move to prevent pension funds from investing in cryptocurrencies is related to efforts by South African regulators to find the appropriate framework to govern the blockchain industry.
In June, for example, the Intergovernmental Fintech Working Group (IFWG) based in the country, called for the regulation of South Africa’s cryptocurrency ecosystem in its new position paper that it released at the time.
Similarly, sometime in July, the South African Revenue Services had reportedly made changes to its online tax filing system, a move aimed at targeting cryptocurrency arbitrage traders.
The finance ministry is using consumer protection considerations to support the draft proposals just like other South African regulators justify their actions against cryptocurrencies.
It maintains that the proposed changes will limit the extent to which retirement funds may invest in a particular asset or in particular asset classes thereby ensuring their protection.
Don’t miss important articles during the week. Subscribe to blockbuild weekly digest for updates.