Cryptocurrency exchanges operating in South Africa will be subject to supervision for the first time, after the authorities unveiled new rules to increase its oversight of the industry and safeguard consumers.
(Bloomberg) — Cryptocurrency exchanges operating in South Africa will be subject to supervision for the first time, after the authorities unveiled new rules to increase its oversight of the industry and safeguard consumers.
The Financial Sector Conduct Authority declared crypto assets as financial products in a notice published Wednesday and said it would require companies that trade in cryptocurrencies and other digital assets to obtain a license from June 1. The FSCA announcement is the first step needed to bring the industry within the South African legal framework, said Brent Peterson, head of legal at Easy Crypto Ltd., a crypto exchange.
“The new regulation is really to protect the man in street,” FSCA Commissioner Unathi Kamlana said Thursday in an interview. “It provides some consumer protection — previously we were not able to do this, because crypto was trading completely outside our parameters.”
The measures come as governments around the world push to regulate cryptocurrencies to protect users from turbulent digital coins and fraudsters. US regulators and lawmakers are studying ways to guide the operation of stablecoins.
The introduction of regulations follows two major crypto scams that originated in South Africa, both of which led to the disappearance of billions of dollars in investments. Digital currencies have moved from the periphery of the finance world to the mainstream over the past few years, leading to deeper scrutiny worldwide to prevent providers operating unfettered.
Licensing Period
The new rules will enable clients to complain about crypto exchanges that don’t comply with existing laws in South Africa, and give the regulator the mandate to act on non-compliance. They’ll also allow the FSCA to request information from the crypto companies to enable it better to understand their business models and practices.
Registration of crypto platforms will take between June 1 and Nov. 30, 2023, with the currently unregistered companies allowed to continue trading until then, it said.
“All companies operating in the crypto space can continue doing so, but need to do their checks and be compliant,” Kamlana said.
Most of South Africa’s lenders don’t provide banking services to crypto platforms, citing the high risks associated with cryptocurrencies.
“We don’t do crypto trading, but as I said, we’d love to,” Coen Jonker, chief executive officer of banking startup Tymebank, said in an interview. “We will probably move as soon as we think there’s enough clarity. The sooner we get the guidelines and the regulations out, the better for everyone, because up until that point, what you’re going to have is millions of South Africans who participate in these assets in a completely unregulated manner.”
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