South Africa’s financial regulator on Wednesday issued a notice to declare cryptocurrencies as a financial product. It was also announced that crypto firms in the country will need to apply for a license to operate legally.
The Financial Sector Conduct Authority’s (FSCA) newly issued notice updates the Financial Advisory and Financial Intermediary Services Act to declare cryptocurrencies as a financial product to protect consumers and regulate the market. The Act also defines a crypto asset as a “digital representation of value,” and mandates that assets must be regulated in South Africa from the date of publication. Cryptocurrencies will also be required to apply for a license between June 1 and November 20, 2023, in order to operate legally in the country. The declaration does however not mean that crypto assets are legal tender according to Eugene Du Toit, the head of the Financial Sector Conduct Authority’s Regulatory Frameworks Department. Du Toit added “We are not legitimising crypto assets. We are not giving credence to crypto assets.”
It is reported that the FSCA deliberately made reference to crypto assets rather than cryptocurrencies as regulators do not believe they qualify as currencies, said the regulator’s head Unathi Kamlana. Kamlana said that non-fungible tokens are not covered by the declaration as they act more similar to traditional art investments adding that they do however continue to monitor the NFT market.
The move from South African regulators comes after much anticipation. In July, the South African Reserve Bank (SARB) deputy governor Kuben Naidoo confirmed that regulations partly supporting the sector are set to be rolled out within the next 12 – 18 months. Kuben previously added that as a financial product, cryptocurrencies will fall under the purview of the country’s Financial Intelligence Centre Act and will be monitored for money laundering, tax evasion, and terrorist financing activities.
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