According to a general notice published in a government gazette, crypto assets are now treated as financial products under South Africa’s Financial Advisory and Intermediary Services (FAIS) Act. Crypto asset service providers (CASP), like exchanges, will need to apply for licenses in order to declare crypto assets financial products.
Declare applicable to any digital representation of value not issued by the Central Bank
According to a recently published South African government gazette, crypto assets have been declared as financial products under the country’s Financial Advisory and Intermediary Services (FAIS) Act. The declaration was signed by Unathi Kamlana (FSCA commissioner), and became effective October 19.
South Africa is experiencing an historic moment.
Today, the Financial Sector Conduct Authority(FSCA) has declared a cryptocurrency asset as a financial products under the FAIS Act.
The Government Gazette published this Declaration, as well as on the FSCA site.
— Farzam Ehsani (@farzamehsani) October 19, 2022
The designation, which has been welcomed by some players in South Africa’s crypto industry, applies to any “digital representation of value which is not issued by a central bank but is capable of being traded, transferred or stored electronically by natural and legal persons for the purpose of payment, investment or other forms of utility.”
This declaration comes just months after Kuben Naidoo (South African deputy governor) announced that crypto assets would be treated as financial products. The South African Reserve Bank would be able to regulate crypto assets if such treatment was adopted.
‘Mounting Risk in the Crypto Asset Environment’
Farzam Ehsani is the CEO and founder of South African crypto-exchange platform Valr. He offered his thoughts on why he believes this decision was made. He posted:
The reason for the declaration was cited as being due to the ‘mounting risk in the crypto asset environment’ but it also looks [like]This was to ensure that South Africa met the Financial Action Task Force (FATF), due date for remediation. South Africa could be put on the FATF gray list if it fails to make significant progress or if the recommendations are not completely remediated by October 2022. This would have adverse consequences for the entire country.
Ehsani states that one of the consequences of the declaration is that crypto assets service providers (CASP), such as exchanges must now apply for licenses under FAIS Act. The process must be completed between June 1, 2023, and November 30, 2023. Additionally, the FSCA will request information from CASPs.
Valr CEO stated that the declaration has implications for the industry.
“Overall this is a positive step for the crypto industry and South Africa in general. This Declaration will open the door to many of the large traditional financial institutions (TradFi) in South Africa to start providing crypto products and services.”
The CEO added the declaration brings regulatory clarity — something which has been lacking.
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