South Africa’s finance minister has recently proposed a law amendment that seeks to ban the country’s pension funds from investing in cryptocurrencies.
According to current laws, Pension funds can invest up to 2.5% of their assets under the broad category of “other assets” category, which was interpreted as the ability to invest in cryptocurrencies, although not explicitly stated.
However, Finance Minister Enoch Godongwana is now looking to draft amendments on Regulation 28, the article which states the roadmap on how pension funds may invest member money.
The draft new rule published in the government gazette has added the sentence “A [pension] fund may not invest in crypto-assets directly or indirectly” including under the “other assets” category.
The South African policymakers have defined cryptocurrency as a currency “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.”
The Finance Minister has set a deadline for public comments on the proposed amendment to November 12, making it possible to implement this change later this year. Explaining the move, the treasury explained in a statement:
“Regulation 28, issued in terms of section 36(1)(bB) of the Pension Funds Act, reduces excessive and concentration risk to member savings and ensures protection by limiting the extent to which retirement funds may invest in a particular asset or in particular asset classes.”
In other countries, several pension funds have invested in cryptocurrencies, such as the Texas Firefighters Pension Fund and the Virginia Pension Fund. The US Texas Firefighter Pension Fund had recently allocated $25 million to crypto assets.