The Intergovernmental Fintech Working Group (“IFWG”) has published a discussion paper examining how existing South African financial regulatory frameworks apply to rand-pegged stablecoin arrangements (“Discussion Paper”).
The paper asks a critical and unresolved question: can any of the existing frameworks - including the Banks Act 94 of 1990 (“Banks Act”), the Collective Investment Schemes Act 45 of 2002 (CISCA), or the Financial Markets Act 19 of 2012 (“FMA”) - regulate rand-backed stablecoins or does South Africa need an entirely new, bespoke regime?
The answer, in short, is that no existing framework is adequate without amendment.
Who is the IFWG?
The Intergovernmental Fintech Working Group (“IFWG”) is a South African inter-agency body established to develop regulatory frameworks for fintech and digital assets. It brings together representatives from the South African Reserve Bank, the Financial Sector Conduct Authority (“FSCA”), the National Treasury, the South African Revenue Service and the Financial Intelligence Centre.
The IFWG's mandate is to monitor developments in the fintech space, assess regulatory gaps and recommend proportionate regulatory responses that align with South Africa's risk-based approach and international standards.
The IFWG has been actively engaged on stablecoins for several years. Its 2021 Position Paper on Crypto Assets acknowledged that new use cases would emerge and committed the group to ongoing monitoring. The IFWG's Crypto Assets Regulatory Working Group (“CAR WG”) subsequently produced the South African Stablecoin Landscape Diagnostic, which outlined current stablecoin use cases, associated risks and regulatory gaps. The Discussion Paper is the second paper in this series and represents one of the most substantive analytical works on stablecoins in the South African market.
What Does the Discussion Paper Cover?
The Discussion Paper assesses whether existing regulatory frameworks can be extended to regulate rand-pegged stablecoin arrangements, without the need for new legislation. The Discussion Paper reaches the following conclusions regarding the regulation of stablecoins under the Banks Act, CISCA, and the FMA:
The Banks Act: deposit-taking
The paper finds that the underlying activities of rand-pegged stablecoins appear, on a functional reading, to fall within the definitions of "deposit" and "the business of a bank" in the Banks Act.
A stablecoin issuer accepts fiat in exchange for a token and effectively agrees to repay at least an equivalent amount on redemption — either unconditionally or conditionally, on demand or at a specified time, with or without interest.
However, the paper is clear that the overall business model of stablecoin arrangements is incongruent with the business of a bank. Banks deploy deposited funds through lending, investment and financing activities. A prudent stablecoin issuer, by contrast, should hold its reserves specifically to maintain the peg and should not use those funds for granting loans or for other financing activities.
The paper recommends that further consideration be given to whether any existing exemption notices under the Banks Act could accommodate stablecoin arrangements — including the proposed exemption relating to specific activities conducted in the national payment system — and that any bespoke framework would need to expressly exclude stablecoins or stablecoin arrangements from the definition of "deposit".
CISCA: collective investment schemes
While classifying stablecoin arrangements as collective investment schemes (CISs) would, in principle, afford stablecoin holders a high level of consumer protection, the Discussion Paper concludes that this approach would fundamentally alter the nature of stablecoin arrangements.
The key difficulty lies in the requirement that CIS assets are invested for the benefit of investors. Whether a stablecoin arrangement invests its reserve assets and passes returns to holders is an issuer's business decision and not an inherent feature of stablecoin arrangements. Imposing this requirement would reposition stablecoins from mediums of exchange to investment portfolios and would raise difficult questions about whether they could continue to function as payment instruments.
The CIS framework also does not address the specific risks posed by stablecoins, including permissible stabilisation methods, reserve asset encumbrance, minimum redemption thresholds and the interaction between CIS regulation and payment laws.
The FMA: derivatives
The Paper acknowledges that a stablecoin technically appears to meet the criteria for a "derivative instrument" under the FMA. The definition of “derivative instrument” in the FMA is broad, and encompasses securities whose value is determined by or derived from an underlying asset, rate, index or economic measure.
If stablecoins were brought within the FMA framework, they would need to be issued by authorised over-the-counter derivative providers (ODPs) and traded on licensed exchanges or over-the-counter platforms regulated by the FSCA.
The Paper cautions, however, that applying the FMA without addressing the fundamental differences between derivatives and stablecoins risks misaligning stablecoins' core economic function and hindering their utility in the financial system. Derivatives are contractual instruments used for speculation and hedging on future price movements. Stablecoins are designed for present stability and transactional use.
Applying ODP-specific obligations such as margining, prudential capital reserves and transaction reporting would need careful recalibration before being applied to stablecoin arrangements.
A stablecoin-specific regime: the alternative
Beyond the existing frameworks, the Discussion Paper also explores the option of a bespoke stablecoin regulatory regime.
The Discussion Paper's overall conclusion is that, while elements of existing frameworks may be adapted, none are wholly sufficient or comprehensive enough without amendment to address the full risk set presented by stablecoin arrangements.
A risk-based, bespoke framework, conceivably housed in the CoFI Bill and/or the Financial Sector Regulation Act, would enable regulators to design licensing regimes and prudential standards tailored to the actual economic functions that stablecoins perform, whether as instruments of payment, settlement or investment.
Public Comments
The IFWG invites stakeholders to provide input on the analysis presented in the Discussion Paper, the adequacy of the existing frameworks considered and any additional considerations relevant to the development of a comprehensive regulatory regime for rand-pegged stablecoins.
Written comments must be submitted using the prescribed comment template by Monday, 18 May 2026.
This is a significant opportunity for industry participants,including stablecoin issuers, crypto asset service providers, banks, payment service providers and institutional investors, to shape the regulatory framework that will govern this space.
The comment process allows stakeholders to engage directly with the substantive legal and policy questions raised in the paper, including the suitability of each proposed framework, the risks and practical implications of any proposed classification, and the case for a bespoke regime.
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Read the original publication at ENS
