A policy and regulatory framework for stablecoins in South Africa: Implications for South African Reserve Bank.
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Date
2024
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Publisher
University of the Western Cape
Abstract
The digital revolution has reshaped the financial landscape, with cryptoassets, including stablecoins, standing out as a pivotal innovation. Anchored to traditional fiat currencies or commodities, stablecoins promise stability, efficiency, and enhanced accessibility in financial transactions. However, their rapid adoption necessitates robust regulatory frameworks in order to ensure financial stability, consumer protection, and financial integrity. Within South Africa’s existing framework, stablecoins lack a specific regulatory foundation as a means of payment. To bridge this gap, this thesis conducts a thorough review of stablecoin definitions, design features, use cases, and the unique risks these pose when compared to traditional financial instruments. Given the interconnectedness of South Africa’s financial system, addressing these risks proves critical.
The research identifies regulatory gaps by examining South Africa’s fintech institutional setup and recommendations from international bodies and South Africa’s Intergovernmental Fintech Working Group. In response, it proposes a principles-based policy and regulatory framework for stablecoin issuers and service providers. This framework aims to address deficiencies and capitalise on opportunities for improvement. In order to foster stablecoin growth aligned with technological advancements, the South African Reserve Bank and other policymakers could benefit from implementing the proposed regulatory principles. By adhering to global standards, regulatory authorities can harness stablecoin opportunities while mitigating inherent risks.
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Keywords
Cryptoasset, Fiat currency, Financial stability and systemic risk, South African Reserve Bank, Policy and regulation
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