South Africa has declared crypto to be a financial product, marking the start of regulating crypto assets within the country. Regulating crypto will provide benefits, including consumer protection and AML/KYC compliance.
South Africa’s financial regulator, the Financial Sector Conduct Authority (FSCA), published a notice on October 19 where the country’s 2002 Financial Advisory and Financial Intermediary Services Act (FAIS) was updated to include definitions of crypto assets under law.
As a result, for the first time, crypto assets are under regulation in South Africa.
Went into force upon publication in the Green Gazette (the government gazette of record), the FSCA notice defines a crypto asset as “a digital representation of value” that can be electronically stored, traded, transferred, but is not issued by a central bank. The definition includes that crypto assets use “cryptographic techniques” and use distributed ledger technology.
The notice then states that crypto assets are declared financial products, now subject to financial services law.
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
Declaring crypto assets in South Africa
Under South Africa’s FAIS, a financial product is defined as a security, debenture, “any money-making instrument”, or any tool, instrument, or service that grants rights to securities and instruments. To the FAIS, financial products can be offered by financial service providers licensed in South Africa, regardless of being domestic or international firms.
A draft declaration on crypto assets in South Africa was published in November 2020, resulting in the June 2021 creation of a roadmap for a regulatory framework for crypto in the nation.
In regulating crypto assets, the country hopes to conform to Anti-Money Laundering/Know Your Customer (AML/KYC) standards to help protect investors – but have been met with some opposition. A known critic of these standards, Hermann Vivier, the founder of Bitcoin Ekasi says that “authorities tend to approach the situation with a one-size-fits-all solution, which for many, turns out not to be a solution at all.”
In February 2022, South Africa’s National Treasury confirmed that it intends on declaring cryptocurrency a financial product so that it can improve the monitoring and compliance of crypto transactions.
South Africa is ranked 30th amongst cryptocurrency adoption, according to the Chainalysis 2022 Global Crypto Adoption Index. The nation’s number of crypto holders is estimated to be up to 10-13% of its population.
