The South African Reserve Bank recently introduced a new directive under the Financial Intelligence Centre Act (FICA). The directive requires banks and other financial institutions to send information about the originators and beneficiaries of cross-border financial transfers. Known as the ‘Travel Rule’, the objective of the directive is to promote greater transparency and controls on money laundering or terrorist financing in cross-border transactions.
The FICA Act has historically applied to financial firms and banks, however, South Africa’s government has now proposed new amendments which will bring cryptocurrency firms under the broader umbrella of regulation.
While no formal date has been set for the introduction of these new amendments, Angus Brown, Co-Founder of payment company Centbee, says it is only a matter of time. He added that his firm is well-prepared for the incoming regulations and will be FICA compliant when necessary. This includes preparations for the so-called ‘Travel Rule’ and collecting information from both those sending and receiving transactions.
‘We are doing all the things we’re supposed to do for FICA compliance already. And so for us, being an accountable institution makes very little difference at the day-to-day level and our service to customers.’
He added that while some larger cryptocurrency exchanges are likely to be comfortable with more regulation, other less savoury companies might not like the lost anonymity or extra work required. ‘First crypto firms must be brought into the community of accountable institutions – called AI’s. Then the Travel Rule applies and that means you’ve then got to start collecting the information about sender and receiver for transactions.’
A win for Centbee
Brown noted that Centbee is particularly well positioned for this regulatory change as the group uses the BSV blockchain, which is fundamentally designed for precisely these types of transactions and information sharing.
He added that BSV not only meets the required standards, but is also able to preserve the party’s privacy and still meet all the requirements of the law.
Brown further encouraged cryptocurrency firms in South Africa and abroad to ensure they are compliant and up to date with the new rules.
‘An old rule in any regulatory financial payments world is that you must know what you are supposed to comply with. You need to read about it and understand it. Does it apply to me? When does it apply to me? ‘
‘How does it apply to me? Analyse it. Put the pieces together and then go okay, now what’s my plan? And do something about it.’
Brown warned of consequences for those businesses who fail to comply with the Travel Rule and the new directive. To remedy this, he recommends that companies brush up on the existing Travel Rule protocol that has already been developed for BitcoinSV.
‘What I would recommend is they go and have a look at that standard that the community put together. It’s got a nice introductory section on it which explains the context, gives some reference materials you can read about the implications of it and then decide what to do.’