South Africa Classifies Crypto Assets As Financial Products
As per the notification published in a government gazette, crypto assets are now considered financial products under South Africa’s Financial Advisory and Intermediary Services (FAIS) Act. The declaration of crypto assets as financial products requires crypto asset service providers (CASP), such as exchanges to apply for a license.
South African Reserve Bank to Regulate Crypto Assets
Crypto
assets have been declared as financial products under the Financial Advisory
and Intermediary Services (FAIS) Act as per the South African government
gazette notification. The Commissioner of the Financial Sector Conduct Authority
(FSCA), Unathi Kamlana has signed the declaration, which became effective on
October 19.
The
government's notification has been welcomed by stakeholders of the crypto
industry in South Africa and 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."
The declaration also comes just a few months after the deputy governor of the South African central bank, Kuben Naidoo, revealed that crypto assets would be considered financial products. The decision will allow the South African Reserve Bank to regulate crypto assets.
"Mounting Risk in the Crypto Asset Environment"
The
founder and CEO of South African crypto exchange platform Valr, Farzam Ehsani,
offered his perspective on what he thinks prompted the move. He tweeted:
"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 action was done to
comply with a Financial Action Task Force (FATF) deadline for remediation of
recommendations for South Africa. Recommendations not fully remediated or
significantly progressed by October 2022 could lead to South Africa being
placed on the FATF grey list, which could have materially negative consequences
for the country as a whole."
Ehsani
explained that one consequence of this declaration is that crypto asset service
providers (CASP), such as exchanges, now need to apply for a license under the
FAIS Act. This has to be done between June 1, 2023, and November 30, 2023. CASPs will also be required to share information with the FSCA upon
request.
On
what the declaration means for the industry, the Valr CEO said:
"Overall,
this is a positive step for the crypto industry and South Africa in general.
This Declaration will enable 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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