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South African draft ban on crypto for pensions may catch tokenized stocks, bonds


On Friday, the South African government published a draft change to regulations to ban pension fund investment in cryptocurrencies. However, its description seems to catch stocks and bonds, which could limit the activities of pension funds in the near future. Several incumbent regulated institutions are working on tokenizing conventional assets, some of which might be issued natively on blockchain.

The term crypto-assets covers a broad range of assets that use blockchain, including cryptocurrencies, stablecoins and tokenized conventional assets such as stocks, bonds and real estate.

South African’s draft regulation adds crypto-asset to a list of assets with restrictions for pension funds, but its definition is rather broad.

It states, “crypto-asset 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.”

This definition would include stocks and bonds issued on a DLT, which contrasts with the BIS and others that have distinguished between different types for crypto-assets.

For example, when the Basel Committee on Banking Supervision published proposals re bank crypto-asset exposures, its definitions split them into two categories. The first group “are eligible for treatment under the existing Basel Framework (with some modifications and additional guidance). These include certain tokenised traditional assets and stablecoins.”

That’s in contrast to a second group, “such as bitcoin, that do not fulfil the classification conditions. Since these pose additional and higher risks, they would be subject to a new conservative prudential treatment.”

South Africa requested comments on its planned regulation change, and it’s likely someone will notice this issue.

Meanwhile, in early March, U.S.-based NYDIG said insurers had exposure to more than $1 billion in bitcoin via NYDIG. Its investors include New York Life and MassMutual.

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