We knew it was bound to happen – cryptocurrencies and local exchanges will soon be regulated in South Africa. South Africa’s Financial Sector Conduct Authority (FSCA) has published a draft declaration that will declare crypto assets as financial products under the Financial Advisory and Intermediary Services Act (FAIS).
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At its core, this means that cryptocurrency exchanges, advisors, and brokers will have to become registered financial services providers (FSPs). This regulation is needed, according to FSCA, because of the growing interest by retail investors in the asset class, which may soon become a sizable portion of investable funds.
“The draft declaration in no way impacts the status of crypto assets in the context of other laws such as exchange control regulations, requirements under the Pension Funds Act, Collective Investment Schemes Act and so forth, nor does it attempt to regulate, legitimise or give credence to crypto assets,” according to an FSCA statement.
“The draft declaration is merely intended to be an interim step in mitigating certain immediate risks in the crypto assets environment, pending the outcome of broader developments currently taking place through the Crypto Assets Regulatory Working Group (CAR WG), which will inform future policy interventions to be implemented across a variety of regulators and laws.”
In May 2020, a position paper was published by the Intergovernmental Fintech Working Group, which involved government, regulators and industry players. It set out a regulatory framework for crypto assets which mainly focused on:
- The implementation of an anti-money laundering and counter-terrorism financing regime
- A licensing and supervisory regime from a conduct of business perspective; and
- A regulatory regime for the monitoring of cross-border financial flows.
It is hoped that this regulation will result in improved disclosures about the high risks of these assets, which would ensure that a more responsible advice process is adopted as these assets become more popular. It would include proper risk assessments, similar to what financial advisers have to share with their clients today for any fund investment.
