South Africa’s financial regulator, The Financial Sector Conduct Authority (FSCA), classified crypto assets as a financial product and effectively subjected it to regulatory oversight upon the publication of the notice in the government gazette on Oct. 20.
When Unathi Kamlana, the commissioner of the FSCA, signed the declaration into effect, it marked a watershed moment as traditional financial institutions could start providing crypto services.
The classification was added to the country’s existing Financial Advisory and Intermediary Service Act, 2022, wherein crypto assets are defined as a ‘digital representation of value’ that is not issued by a central bank but can be traded, transferred, and stored for the purposes of payment, investment and other use cases.
According to the notice, crypto assets are also deployed via cryptographic means and distributed ledger technology as opposed to a central bank.
This also classifies crypto assets as securities, sharing the same treatment as shares in a company, debentures, debt, money-making instruments, and proof in the form of any warrant or certificate that confers rights to utilize securities.
The update also enables financial regulators to have a standard to adhere to, especially in regards to consumer protection, and that financial advisors are allowed to advise their clients on crypto investments, Marius Reitz, general manager for Africa at crypto platform Luno, said in an emailed statement to Bloomberg.
Crypto asset services provider obligations
Crypto asset services providers are subject to a deluge of new rules to follow to carry out operations legally in the country. This includes requiring individuals operating crypto asset services to undergo evaluation by the gazette and the Advisory Committee to prove it is a trusted corporate body and attest to their good character during the application process of becoming a financial services provider.
The financial services provider will obtain a license, which may be suspended or revoked according to the FSCA’s terms.
They must also conduct audits and maintain full and proper accounting records annually on the cash flow information, income statements, financial statements, money, and assets held on behalf of clients, among other things.