• The Financial Sector Conduct Authority (FCSA) officially declared crypto assets a financial product in SA last week.
• Current crypto asset providers do not have to apply to become an FSP at the moment.
• That said, they must do so between 1st June 2023 and 30th November 2023 to comply with the FCSA’s regulations.

Last week one of the biggest stories locally was the declaration from the Financial Sector Conduct Authority (FCSA) to view crypto in SA as a financial product.

We discussed the Financial Advisory and Intermediary Services Act (FAIS Act) in the latest episode of the africast, looking at the declaration from the consumer perspective and the many permutations it has.

Now, we have a legal perspective thanks to input from Dawid de Villiers, Lerato Lamola and Analisa Ndebele, all of who are from law firm Webber Wentzel.

According to the experts, the push for regulation is critical given the frequency with which crypto in SA is being used for illegal or nefarious means.

“The Declaration comes at an opportune time when South Africa is grappling with a potential grey-listing. The lack of crypto asset regulation was identified as a major anti-money laundering and counter-financing terrorism (AML/CFT) deficiency by the Financial Action Task Force (FATF),” the lawyers highlighted.

Running through what a crypto asset is, the FCSA stipulated the following criteria:

a) “is not issued by a central bank, but may be traded, transferred or stored electronically by natural and legal persons for the purpose of payment, investment and other forms of utility;

b) applies cryptographic techniques; and

c) uses distributed ledger technology.”

Should you meet the above, a crypto provider will need to apply with the FCSA in order to be categorised as a financial services provider (FSP). Once that process is complete, said crypto asset then falls under the jurisdiction of the FCSA and must comply with its regulations.

As we have highlighted previously, this process will be a lengthly one, with a few provisos for local crypto operators to be aware of.

“In terms of the Exemption, existing crypto asset providers are currently exempt from having to apply as a FSP under FAIS, provided that the crypto asset provider applies for a FSP licence during the designated six-month application period, which will run from 1 June 2023 to 30 November 2023,” the Webber Wentzel trio explained.

With members of the public capable of commenting on the aforementioned draft by 1st December 2022, it will be interesting to see the route SA’s acceptance of crypto will head.

[Image – Photo by Mariia Shalabaieva on Unsplash]