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South Africa Takes Steps To Regulate Crypto Assets
- South Africa
- Crypto assets
21-10-2022
After many years of uncertainty surrounding the treatment of crypto assets in South Africa, the Financial Sector Conduct Authority (FSCA) has taken the much-anticipated step of bringing crypto assets within the realm of financial regulation in South Africa.
Crypto assets are broadly defined as a digital representation of value that: (a) is 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; (b) applies cryptographic techniques; and (c) uses distributed ledger technology. Until now, crypto assets have not been regulated under South Africa’s financial regulations, or otherwise, which has left traders exposed.
However, on 19 October 2022, the FSCA, which is responsible for regulating financial market conduct in South Africa, issued a general notice declaring crypto assets to be financial products, in terms of paragraph (h) of the definition of “financial products” under the Financial Advisory and Intermediary Service Act, 2002 (FAIS).
As a result of this declaration, crypto assets will now be regulated financial products under FAIS, and the obligations which FAIS imposes on suppliers of financial products will now similarly apply to crypto asset suppliers and crypto trading platforms that offer intermediary services in relation to crypto assets. An intermediary service includes any act “the result of which is that a client may enter into, offers to enter into or enters into any transaction in respect of a financial product with a product supplier.”
There has been a lot of debate on how best to regulate crypto assets in South Africa for the past few years, and so this declaration should not come as a surprise to crypto asset trading platforms, or crypto asset traders. In fact, in anticipation of a declaration that would bring crypto assets under the financial regulations, many crypto trading platforms had already started implementing measures to ensure compliance with anti-money laundering and anti-terrorism legislation, including “know-your-client” requirements for traders. Unfortunately, it is not yet clear what impact bringing crypto assets within the realm of FAIS will have on the crypto asset market in South Africa.
If you believe that you may be impacted by this declaration, or just want to know more about crypto asset regulation, you can get in touch with our Technology, Media, and Telecommunications team who can assist you with any queries.
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.