The Financial Sector Conduct Authority (FSCA) of South Africa has made a significant announcement, revealing the approval of operating licences for 59 cryptocurrency firms as of March 12, 2024. This announcement was made by a representative of the FSCA during the ongoing FSCA Industry Conference in Johannesburg. Among the 355 applications received by the regulator, 59 have successfully obtained licences, while the remaining 262 are currently undergoing vetting processes.
The approved firms encompass various business models, including advisory services, exchanges, payment gateways, crypto-to-crypto and crypto-to-fiat conversion, crypto asset arbitrage, tokenisation, provision of index-based products, and wallet services.
Felicity Mabaso, the divisional executive for licensing at the FSCA, emphasised that any entity engaging in crypto-related activities without obtaining a license will face investigation and potential consequences for their actions.
This development reflects South Africa’s ongoing efforts to liberalise its crypto regulatory framework. The process began in November 2018 when the South African Reserve Bank (SARB), along with the FSCA, South African Revenue Services (SARS), and the Financial Intelligence Centre (FIC), established the Crypto Assets Regulatory Working Group.
Subsequent milestones included the publication of a position paper in July 2021, offering recommendations for a revised regulatory approach, and the issuance of guidelines by SARB in August 2022, providing clarity on how financial institutions could serve crypto clients.
The declaration of crypto assets as financial products by the FSCA in October 2022 marked another crucial step, bringing these assets under its regulatory jurisdiction. Following this, the FSCA commenced accepting licence applications in June 2023.
Additionally, the FSCA highlighted that licensed entities would be subject to ongoing supervision post-licensing, while investigations into unauthorised crypto-related financial activities are set to commence.
FSCA’s Licensing of 59 Crypto Entities Signals Regulatory Evolution in South Africa
The approval of operating licenses for 59 cryptocurrency firms by the Financial Sector Conduct Authority (FSCA) of South Africa marks a significant milestone in the country’s journey towards embracing digital assets within its regulatory framework. This move not only signals a progressive approach to regulating the crypto industry but also reflects the growing importance of cryptocurrencies in the global financial landscape.
One notable aspect of this development is the diverse range of business models covered by the approved firms. From advisory services to crypto exchanges and payment gateways, the spectrum of services offered underscores the multifaceted nature of the crypto market and the need for comprehensive regulation to ensure consumer protection and market integrity.
The emphasis placed by Felicity Mabaso, the divisional executive for licensing at the FSCA, on the consequences for entities engaging in crypto-related activities without proper licensing highlights the regulator’s commitment to enforcing compliance and maintaining accountability within the industry. This proactive stance is essential for safeguarding investors and mitigating the risks associated with unregulated crypto operations.
South Africa’s journey towards liberalising its crypto regulatory framework has been a gradual but deliberate process. The establishment of the Crypto Assets Regulatory Working Group in 2018 laid the groundwork for collaborative efforts between key stakeholders to develop informed policies and guidelines. Subsequent milestones, such as the publication of a position paper and the issuance of guidelines by the South African Reserve Bank, have provided clarity and direction for regulatory reforms.
The declaration of crypto assets as financial products by the FSCA in 2022 was a pivotal moment that brought these assets under the regulatory purview of the authority. By extending its oversight to encompass crypto activities, the FSCA aims to foster a safe and transparent environment for crypto market participants while addressing concerns related to investor protection and financial stability.
Looking ahead, the ongoing supervision of licensed entities and the commencement of investigations into unauthorised crypto-related activities underscore the FSCA’s commitment to ensuring compliance and upholding regulatory standards. As South Africa continues to navigate the evolving landscape of digital finance, the effective regulation of cryptocurrencies will remain essential for fostering innovation, facilitating economic growth, and safeguarding the interests of all stakeholders involved.
