South African crypto platforms must be licensed by 2023 regulator

by Arthur · October 20, 2022

JOHANNESBURG, Oct 20 (Reuters) – Cryptocurrency financial companies in South Africa must apply for a license between June 1 and Nov. 20, 2023 to operate legally, the country’s financial regulator said on Thursday.

A declaration on Wednesday that crypto-assets are financial products does not mean they are legal tender, Eugene Du Toit, head of the Financial Sector Conduct Authority’s Regulatory Frameworks Department, told a news conference.

“We do not legitimize crypto-assets,” Du Toit said. “We do not give credence to crypto assets.”

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Financial watchdogs around the world have been grappling with how to regulate the growing number of digital cryptocurrencies and tokens, whose prices have fallen from historic highs reached last November.

The FCSA deliberately referred to cryptoassets rather than cryptocurrencies, as regulators do not believe they qualify as currencies, the regulator’s chief Unathi Kamlana said.

The declaration will enable authorities to tackle fraud and protect customers, which previously had no power to do so, he said.

Non-fungible tokens (NFTs) are not covered by the declaration as they function more like traditional art investments, Kamlana said, adding that they would continue to monitor the NFT market.

The declaration and regulations to be followed could help South Africa avoid being blacklisted by global watchdog the Financial Action Task Force, which has deficiencies in its anti-terrorist financing and anti-money laundering regime, regulators said.

South Africa’s central bank governor said in August that the country was at risk of being greylisted, which IMF researchers said last year reduces capital flowing into a country by an average of 7.6% of GDP.

Further regulation of financial institutions’ exposure to cryptoassets is likely, as well as possibly more customer verification requirements, Kamlana said in an interview with Reuters, declining to give details on timing.

“South Africa is actually among the few (countries) that are ahead of the curve in this area,” he said, when asked if regulators had been slow to respond to the upsurge in interest in crypto-assets in recent years.