Regulations and crypto’s coming of age

As featured on Mybroadband

The world of finance has had to do a double take this year, as cryptocurrency fervour once again captured the public’s imagination.

Over the course of a few hair-raising months, Bitcoin delivered on the famed volatility that precedes it, grazing $64k highs and in the same breath retracing sharply to $30k, before rallying back above $40k.

Having weathered storms of controversy ranging from environmental concerns to scalability issues, one factor remains constant – the increasingly urgent question of regulation.

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Addressing crypto’s growing pains

Way back in 2009, when Bitcoin was little more than a string of unassuming Github commits, the idea of regulating blockchain protocols was alien at best.

Now, over a decade later, governments are grappling with the emergence of a $2Tn financial market that is giving the established financial paradigm a run for its money. 

As regulations become increasingly inevitable, both locally and internationally, cryptocurrency platforms must adapt to ensure continued growth and the safety of their users.

VALR, a leading South African exchange offering more than 60 tokens for trading, has anticipated an influx of regulations since its inception in 2019.

Farzam Ehsani, CEO of VALR, explains how his team has been preparing for these developments, stating, “from the time we were established, we engaged with regulators to let them know what we wanted to do and ensure that we were fully compliant from the get-go”.

Ehsani continues: “VALR has gone above and beyond what is required of us from a regulatory standpoint (at considerable cost to our company) to ensure that we not only comply with the law now, but that we comply with what we anticipate the laws and regulations to be in the future.

An example of this is Know-Your-Customer, known as KYC, where no customer can trade a single cent or satoshi without being fully verified on our platform first.”

VALR’s stringent KYC procedures help to safeguard against instances of fraud, while also ensuring that each user trades using funds deposited from a bank account in their own name, allowing for increased accountability.

While crypto idealists may feel that governmental regulations present an affront to the sovereignty at the heart of the industry’s spirit, these measures form a vital component of crypto’s continued adoption.

As Ehsani elaborates, espousing VALR’s ethos, “For crypto to serve all of humanity, it cannot remain at the fringe and must become mainstream.

To become mainstream, it must exist within appropriate regulatory frameworks that seek to serve and protect individuals in society.”

The importance of regulation

At present, one of the significant challenges faced by all parties involved lies in reconciling Exchange Control regulations established in 1961 with today’s inextricably linked, globalised community.

Finance and technology have evolved rapidly in the last 60 years, and regulators need to ensure that policies are cognisant of this incredible shift.

Over the last few years, the South African regulators have published a series of position papers that outline their approach to including crypto assets within the regulatory ambit.

While some uncertainty still exists regarding the timing of the implementation of the published guidelines, the position papers have been broadly welcomed as a positive step for South Africa.

Ehsani, ever-committed to empowering investors, provides a word of advice for those seeking to understand the rapidly-changing regulatory landscape, stating, “In South Africa, the regulators have published a few position papers, the latest of which is the Position Paper on Crypto Assets issued by the IFWG on 11 June 2021.

Investors may wish to familiarise themselves with this paper if they want to better understand the regulatory framework that is in the process of being established in SA.”

Benjamin Franklin once said, “by failing to prepare, you are preparing to fail”.

South Africa has taken its first steps towards providing regulatory clarity for the country and we now wait for the execution of the proposals.

It seems users of VALR need not worry though, as the exchange has positioned itself through ample preparation to welcome the upcoming regulations.