South African Finance Minister Enoch Godongwana has presented proposals to ban pension funds from investing in cryptocurrencies, and also set November 12 as the deadline for public comment.

Cryptocurrencies a gray area

According to a report By Business Insider SA, the time limit for Godongwana for the public to comment on the draft proposals suggests that they want the changes to take effect before the end of the year.

Prior to Godongwana’s proposals, South African pension funds viewed cryptocurrencies as a gray area where investment of up to 2.5% of assets held was allowed. However, as Business Insider explains, this ambiguous part of the regulation that pension funds use to legally invest in cryptocurrencies will be removed once the minister’s proposed changes are approved.

“A [pension] the fund cannot invest in crypto-assets directly or indirectly, ”the report explained, citing new rules published in a government document.

Meanwhile, the Ministry of Finance’s draft proposals suggest that Godongwana is also seeking to broaden the definition of cryptocurrencies to include derivatives such as non-fungible tokens (NFTs) as well as any digital assets not issued by central banks. . In the report, Godongwana’s proposed definition of cryptocurrency reads as follows:

‘[C]rypto -actif “, a digital representation of value which is not issued by a central bank, but which can be traded, transferred or stored electronically by natural and legal persons for the purposes of payment, investment and other forms of utility; applies cryptographic techniques and uses distributed ledger technology.

South African regulators are working to find the right framework

As the report notes, Godongwana’s determination to prevent pension funds from investing in cryptocurrencies comes as South African regulators try to find the right framework to govern the blockchain industry. For example, in June 2021, the Intergovernmental Financial Technology Working Group (IFWG) of South Africa published its new position paper calling for regulation of the country’s cryptocurrency ecosystem.

Likewise, Bitcoin.com News reported in July, that the South African tax service made changes to their online tax filing system in an effort to target cryptocurrency arbitrage traders.

Much like other South African regulators who have used consumer protection considerations to justify their actions against cryptocurrencies, Godongwana’s ministry is also using similar arguments to support the draft proposals. He says the proposed changes will provide protection by limiting the extent to which pension funds can invest in a particular asset or in particular asset classes.

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