From CompliNEWS | Financial Service Intelligence Watch
As noted in our previous blog, the Financial Sector Conduct Authority (FSCA) has published the Declaration of Crypto Assets as a financial product under the FAIS Act, which was gazetted on 19 October 2022. The declaration brings providers of financial services in relation to crypto assets within the FSCA’s regulatory jurisdiction.
On 20 November 2020, the FSCA published a draft Declaration of Crypto Assets as a Financial product under the FAIS Act, for public consultation. A total of 94 individual comments were received from 22 different commentators. Following this public consultation process, the FSCA published the final Declaration in the Government Gazette and on the FSCA’s website.
The FSCA has also published a Policy Document supporting the Declaration. The Policy Document provides clarity on the effect of the Declaration, including transitional provisions, and the approach the FSCA is taking in establishing a regulatory and licensing framework that would be applicable to Financial Services Providers (FSPs) that provide financial services in relation to Crypto Assets.
In addition to the Declaration and Policy Document, the Authority also published a general exemption for persons rendering financial services (advice and/or intermediary services) in relation to Crypto Assets, from section 7(1) of the FAIS Act.
To facilitate the application of an appropriate regulatory framework for Crypto Asset FSPs once licensed, the FSCA also published a Draft Exemption of Persons rendering Financial Services in relation to Crypto Assets from Certain Requirements.
The draft exemption proposes to exempt licensed Crypto Asset FSPs and their key individuals and representatives from certain requirements of, amongst others, the General Code of Conduct for Authorised Financial Services Providers (General Code) and their Representatives and the Determination of Fit and Proper Requirements, 2017 (Fit and Proper requirements). Requirements contained in the General Code and Fit and Proper requirements will apply to all Crypto Asset FSP’s once licensed, except those requirements that they are exempted from in terms of the draft General Exemption.
The draft General Exemption has been published for public comment pending finalisation, to solicit stakeholder inputs on the proposed regulatory framework that will apply to licensed Crypto Asset FSP’s. Submissions on the draft Exemption must be made using the submission template available on the FSCA’s website and be submitted in writing on or before 1 December 2022 to the FSCA at FSCA.RFDStandards@fsca.co.za
Crypto-asset service providers will have to be licensed after SA authorities designated digital assets as financial products to bring them under regulatory control and offer better protection to customers who dabble in the virtual tokens, reports BusinesLIVE. The Financial Sector Conduct Authority (FSCA), one of SA’s two main financial regulators along with the Prudential Authority, declared cryptoassets as financial products under the Financial Advisory and Intermediary Services Act in a notice published in the government gazette on Wednesday.
Though the declaration, which was signed by FSCA commissioner Unathi Kamlana, took effect on the date of publication an exemption period will apply. The general exemptions will allow cryptoasset service providers to continue their business, provided they apply for a licence between 1 June and 30 November 2023. They will still be required to render financial services honestly and fairly in the interim. As part of the general exemption, crypto service providers will also be expected to immediately comply with any information requested by financial regulators. Crypto-assets are subject to some form of regulatory oversight in most international jurisdictions, though the degree to which financial authorities are able to apply existing regulations to the digital assets varies by country.
The FSCA said its declaration of cryptoassets as financial products was an initial, interim step to better police the sector, and said further regulatory developments are being considered. The FSCA, which defines cryptoassets as any digital representation of value not issued by a central bank, said it has purposely used as wide a definition as possible to ensure no digital assets are left out of its regulatory net.
Industry insiders believe South Africa’s move to classify cryptocurrencies as financial products could drive the adoption and legitimacy of the sector.
This comes after South Africa’s Financial Sector Conduct Authority (FSCA) amended its financial advisory act from 2002 on Oct. 19 to define crypto assets in the country as financial products. Most importantly, the definition means that cryptocurrencies can now be offered by financial service providers, both domestic and international, given that they are licensed in South Africa.
South Africa already commands a growing number of retail cryptocurrency users, estimated to include as many as 6 million individuals. The South African Reserve Bank has also taken a measured approach in its regulatory stance on the sector in an effort to ensure investor protection without hampering innovation.
Cointelegraph touched base with two prominent cryptocurrency exchanges operating in the country, Luno and VALR, both of which have significant user bases. The companies are well placed to offer insights into the latest regulatory move, given that they cater to both retail and institutional clients.
VALR CEO Farzam Ehsani labeled the FSCA’s move as ‘good news for South Africa setting a path towards regulating crypto-asset service providers in the country’ while ensuring ‘they are serving the public with integrity.’
Marius Reitz, Luno’s general manager for Africa, echoed these sentiments by highlighting the importance of regulatory clarity not only for investors but for financial service providers in the country: Reitz also flagged the key benefit, which now allows financial advisers to formally advise clients on cryptocurrency investments. Before the FSCA amended the definition of crypto assets, financial advisers were not permitted to give advice on unregulated investment opportunities.