• Companies that provide services related to crypto assets, such as Binance and Luno, will have to soon apply for a license from the Financial Sector Conduct Authority (FSCA).
• If these companies continue operating in South Africa without a license after 30th November 2023, they could face R10 million in fines or a 10-year prison sentence for owners.
• FSCA has outlined the application period from 1st June 2023 to 30th November 2023, but will provide an exemption for companies who have already applied for a license.

The hammer is falling on South African cryptocurrency firms and traders. After finally being declared a financial product last year in October by the Financial Sector Conduct Authority (FSCA), the consumer watchdog also said that any company which provides financial services in relation with crypto assets must be licensed.

Crypto companies operating in South Africa must now apply for a license from the FSCA from 1st June 2023 and, if they continue providing crypto services after the 30th November 2023 deadline, could face dire consequences.

These include paying a fine of up to R10 million, or a 10-year prison sentence, according to the FSCA gazette (embedded below).

“Any person who, as a regular feature of the business of such person, renders financial services in relation to crypto assets without a licence will be in contravention of section 7(1) of the FAIS Act, unless exempted,” FSCA explains in the October gazette.

Adding, “A person found guilty of such an offence is, on conviction, liable to a fine not exceeding R10 million or imprisonment for a period not exceeding 10 years, or both such fine and such imprisonment.”

A 2022 study by Finder.com found that 10 percent of adults in South Africa own some form of cryptocurrency, with the most popular token being Bitcoin at 52 percent of ownership. While Bitcoin has seen stormy seas in recent months in terms of its market price, the token is still the most important and popular of the cryptocurrencies.

According to FSCA, which oversees and regulates how financial services providers interact with consumers, “crypto asset related activities pose significant risks to financial customers” and that “Local and international developments have also highlighted the need to urgently start regulating crypto asset activities.”

The utter and spectacular collapse of one of the world’s most prominent crypto exchanges FTX is but one example of how volatile the industry is. The company, owned and operated by a group of eccentric young people, went from being worth $32 billion to bankruptcy in a span of three years.

Its collapse has spurred US Congress to pursue more regulations in the space, of which FSCA alludes.

FSCA says that since there are multitudes of companies that offer services in some relation to crypto assets in South Africa, it is providing an exemption period until a company’s license has been approved or rejected. However, if a company does not apply for a license between the period of 1st June to 30th November, this exemption will lapse.

Large international exchanges such as Binance, Luno and Yellow Card operate locally, and will each have to apply for a FSCA license. While no details on what these licenses will cost, FSCA will usually charge between R2 544 to R46 251, depending on what kind of company is applying [PDF].

Locally operating firms seem to be accepting of the licensing process as it further legitimises the sector and seeks to protect consumers.

“This is an extremely positive step for both the crypto industry and South Africans,” Nick Taylor, head of public policy at Luno for Europe, Middle East and Africa, told CoinDesk.

“The licensing requirements that will flow from the FSCA’s classification will drive up standards, protect consumers, and give businesses the certainty to invest, innovate and create jobs.”

[Image – CC 0 Pixabay]