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. Declaration of the crypto assets as financial products means crypto asset service providers (CASP), such as exchanges, must apply for a license.
Declaration Applicable to Any Digital Representation of Value Not Issued by 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. Signed by the Financial Sector Conduct Authority (FSCA) commissioner, Unathi Kamlana, the declaration became effective on October 19.
This is an historic moment for South Africa:
Today the Financial Sector Conduct Authority (FSCA) declared a crypto asset as a financial product under the FAIS Act.
This Declaration was published in the Government Gazette as well as the FSCA website.
— 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.”
The declaration also comes just a few months after the deputy governor of the South African central bank, Kuben Naidoo, revealed that his institution would be treating crypto assets as financial products. Such treatment would allow the South African Reserve Bank to regulate crypto assets
Mounting Risk in the Crypto Asset Environment’
Reacting to the news, Farzam Ehsani, the founder and CEO of South African crypto exchange platform Valr, offered his perspective on what he thinks prompted this 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 can lead South Africa to be placed on the FATF grey list, which could have materially negative consequences for the country as a whole.
According to Ehsani, 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. In addition, 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 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.