(Kitco News) - South Africa’s financial regulator, the Financial Sector Conduct Authority (FSCA), has posted a brief notice indicating that cryptocurrency assets will now be classified as financial products, enabling them to be regulated.
The FSCA referred to crypto assets as “a digital representation of value,” and mandated that they be regulated in the country beginning from the date of publication.
The regulator indicated that the 2002 Financial Advisory and Financial Intermediary Services Act (FAIS) has now been updated to include a definition of crypto assets, a move that has been anticipated for several months. With its implementation, cryptocurrencies will be regulated in South Africa for the first time.
The FSCA posted its notice in the Green Gazette – the government gazette of record – which defined a crypto asset as “a digital representation of value” that “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; applies cryptographic techniques; and uses distributed ledger technology.”
The title of the new notice is the Declaration of a crypto asset as a financial product under the Financial Advisory and Intermediary Services Act, 2022.
The FAIS defines a financial product as a security, debenture, “any money-making instrument” or an instrument conferring rights to securities and instruments. Financial service providers that are licensed in South Africa can legally offer access to financial products.
According to a press release that accompanied the announcement, the FSCA originally published a draft Declaration of Crypto Assets as a Financial product under the FAIS Act on November 20, 2020, for the public to review and comment on. A total of 94 comments were received from 22 different commentators, and after they were reviewed, the FSCA published the final Declaration in the Government Gazette and on the FSCA’s website.
In June 2021, a national working group created a roadmap for a regulatory framework. In February 2022, South Africa’s National Treasury confirmed the intention of declaring cryptocurrency a financial product and of enhancing the monitoring and compliance of transactions with regard to crypto.
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The new regulation does offer several general exemptions “for persons rendering financial services (advice and/or intermediary services) in relation to Crypto Assets, from section 7(1) of the FAIS Act.”
These exemptions are designed to “facilitate transitional arrangements for existing providers of crypto asset activities.” Said differently, unlicensed providers will be allowed to continue to “render financial services in relation to crypto assets without being licensed, provided that such person applies for a license under the FAIS Act within the period specified in the exemption.”
Unlicensed entities have been allotted the period from Nov. 30, 2022, to June 1, 2023, to offer services without a license while their application is being reviewed.
Crypto asset miners, “node operators performing functions in respect of the security and health of the network,” and individuals who render financial services related to non-fungible tokens are also exempt from the FAIS Act.
