South Africa is on the verge of making history in the African continent by gearing up to license about 60 cryptocurrency platforms by the end of this month. This move positions the nation as a frontrunner in requiring cryptocurrency exchanges to secure operating licenses. With a staggering interest from over 300 crypto asset providers seeking the green light, the Financial Sector Conduct Authority (FSCA) has laid down a strict deadline: get your applications in by November 30 or face the music.
The process, as described by FSCA Commissioner Unathi Kamlana, is meticulous, aiming to sift through the applications in a structured phase due to the sheer volume. Unlike opting for a specialized crypto regulatory framework, South Africa is bringing crypto exchanges under the established Financial Advisory and Intermediary Services Act. This existing legislation sets high standards for honesty, integrity, and competency among financial services providers. Kamlana’s pragmatic approach underscores the belief that waiting for a ‘Rolls-Royce’ regulatory framework is unnecessary when the current laws can effectively bridge most gaps.
The Regulatory Framework Takes Shape
Last year, the FSCA took a decisive step by announcing that crypto assets would be considered financial products. This declaration was a pivotal moment, marking the start of a journey to envelop the crypto industry within South Africa’s legal framework. According to Brent Peterson, head of legal at Easy Crypto Ltd., this move was about safeguarding the average Joe on the street, offering protections that were previously unavailable due to the unregulated nature of crypto trading.
The need for regulation became painfully apparent following two significant crypto scams in South Africa, which resulted in the loss of billions of dollars. As cryptocurrencies increasingly moved from the finance world’s fringes to the mainstream, the global call for regulatory oversight grew louder. South Africa’s response to these challenges includes setting a licensing period for crypto platforms, stretching from June 1 to November 30, 2023. During this window, platforms can continue operating but must align themselves with the new compliance checks.
One notable consequence of the burgeoning crypto market has been the hesitancy of South African banks to provide services to crypto platforms, citing the high risks involved. Coen Jonker, CEO of Tymebank, highlighted the industry’s eagerness for clear guidelines and regulations. The consensus is clear: clarity and regulation will benefit everyone, preventing millions of South Africans from engaging in crypto transactions in a “completely unregulated manner.”
