Amendment Prohibits Pension Funds From Investing In Crypto

No Crypto Investment for Pension Funds

The draft proposals published in the Government Gazette, seek to amend Regulation 28 of the Pension Funds Act. According to Enoch Godongwana, the Minister of Finance for South Africa, “a fund may not invest in crypto-assets directly or indirectly.”

The recent draft amendment is different from previous legislation, which stated that pension funds were allowed to invest up to 2.5% of their funds into cryptocurrency, under the classification “under assets”

Godongwana, in his proposal, also gave an expanded definition of cryptocurrency, which covered non-fungible tokens (NFTs), and other digital assets not issued by the central bank. According to the Minister of Finance:

“Crypto assets 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.”

Meanwhile, the finance minister called for public comments on the draft amendment, stating that the window for comments will close on November 12, 2021.

South African regulators have been working towards establishing a cryptocurrency regulatory framework. Back in June, the Intergovernmental

Fintech Working Group (IFWG) released a whitepaper back in June. The publication made some recommendations, stating that it was important to bring cryptocurrency under the regulatory ambit of South African authorities.

The IFWG further said that cryptocurrency regulations would help to monitor the affairs of crypto-asset service providers (CASPs), while also encouraging innovation, adding, however, that the paper did not mean endorsement of digital assets.

South Africa Collaborates With BIS for CBDC Pilot Project

While South Africa is yet to have a robust regulatory policy for cryptocurrency, regulators have also issued warnings to citizens about crypto investment. Earlier in February, the Financial Sector Conduct Authority (FSCA), South Africa’s regulatory agency, warned the public that people who were involved in cryptocurrency investment schemes did so at their own risk.

The warning came as a result of complaints from aggrieved investors who lost funds after investing in schemes promising hyperbolic returns. In June, founders of Africrypt, a South African crypto investment company allegedly disappeared with 69,000 BTC ($4.2 billion at the current bitcoin price) belonging to clients.

Before their disappearance, one of the owners said that Africrypt was the victim of a hack, and reportedly asked customers not to alert authorities about the incident, as it could slow down tracking of the funds.

Meanwhile, the country’s central bank, the South African Reserve Bank (SARB) is involved in a CBDC project with the Bank of International Settlements (BIS) and other apex banks from Singapore, Malaysia, and Australia. The aim of the pilot, called Project Dunbar, is to test CBDCs for cross-border settlement. SARB earlier revealed that it was carrying out a study on a retail CBDC, which would end in 2022.

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