South Africa says cryptocurrencies are financial products

Category: Africa Regulatory

South Africa has taken a big step forward when it comes to crypto regulation by declaring Bitcoin and other cryptocurrencies are financial products.

FSCA to begin licensing exchanges from June 2023

The country’s Financial Sector Conduct Authority (FSCA) published a general Notice dubbed “Declaration of a crypto asset as a financial product under the Financial Advisory and Intermediary Services Act,” in which it defines a crypto asset as a decentralised “digital representation of value” that applies cryptographic techniques and uses distributed ledger technology (DLT). 

This also means that all crypto exchanges operating in South Africa become subject to supervision for the first time, while the companies trading in crypto will need to get a license from June 1 to November 30, 2023. Non-registered companies will, however, be allowed to continue trading until then.

FSCA Commissioner Unathi Kamlana stated that the new regulation exists in order “to protect the man in street.” 

“It provides some consumer protection – previously, we were not able to do this, because crypto was trading completely outside our parameters,” he asserted.

Kamlana explained that the new rules would empower clients to file complaints against exchanges that won’t operate according to existing laws in South Africa. The FSCA will also be able to act on non-compliance and to ask for data from the crypto companies to better understand their business practice.

Regulations come after crypto scams

These measures follow a few significant crypto frauds that originally came from South Africa – one called Africrypt, a pyramid scheme where reportedly $3.6 billion was stolen and the other dubbed Mirror Trading International (MTI), a Ponzi scheme that allegedly defrauded $1.7 billion from investors. 

South African traders have been asking for regulations for a while now, as the country’s interest in cryptocurrencies has been rising. Some reports show that around 15 percent of the 61 million South Africans have owned at least one crypto.

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