SAFXC reviews FX Code, crypto regulation, market liquidity
The South African Foreign Exchange Committee (SAFXC) reviewed compliance with the FX Global Code, digital asset regulation, and foreign exchange derivatives market liquidity at its October 9, 2025, virtual meeting.
Code compliance and digital asset debate
A local bank outlined its compliance with the FX Global Code, integrating principles through ethical conduct codes, mandatory training, and transparent onboarding.
It enhanced FX transaction best practices via digital channels and systematic controls on client markups, ensuring client approval for exceptions.
The bank also shifted from an outsourced to an integrated treasury model, modernising technology and evolving into a price maker while adhering to the Code.
The South African Reserve Bank (SARB) updated the committee on digital assets, defining them by public-private key cryptography.
While digital assets offer benefits like faster, lower-cost transactions and improved financial inclusion, especially in emerging markets, the SARB highlighted risks.
These include interoperability challenges, potential parallel payment systems, credit and liquidity risks from volatility, financial stability concerns, operational and cyber risks, money laundering, and inadequate consumer protection.
Market liquidity and regulatory clarity
While South Africa does not yet regulate crypto assets as payment instruments, FATF amendments and FSCA declarations now subject specific crypto activities to AML/CFT and financial product regulations.
Upcoming National Payment System Act revisions could empower the SARB to regulate cryptocurrencies as payment instruments, with rand-backed stablecoin sandbox testing planned.
Banks are urged to conduct risk assessments instead of de-risking crypto service providers.
Crypto derivatives fall under the Financial Markets Act, with intermediation regulated by the FAIS Act.
SAFXC members also highlighted inadequate liquidity in the FX derivatives market, especially for retail investors.
This sparked a debate on allowing non-South African authorised dealers, such as high-frequency trading firms, to act as liquidity providers on the central order book.
The SARB reaffirmed its Statement of Commitment to the FX Global Code in October 2025.
A balancing act for SARB
The SAFXC discussions reveal the complex tightrope central banks walk between embracing financial innovation and safeguarding stability.
South Africa's evolving stance on crypto regulation, while cautious, is a necessary step to address market realities and protect consumers.
Ensuring robust liquidity in FX derivatives, especially for retail, remains a critical challenge requiring proactive regulatory engagement.