087 237 9752
083 629 6860

Latest Developments in South Africa’s Crypto Regulations

March 25, 2024

The Financial Sector Conduct Authority (FSCA) of South Africa has recently announced its intent to scrutinize businesses offering crypto-related services that operate without proper registration. In 2022, cryptocurrencies were officially recognized as financial assets, thereby subjecting them to regulatory oversight by South African authorities. As per the directives of the SA Regulators, businesses in this sector were granted a moratorium to seek registration, with the deadline set for the end of November 2023.

Despite the grace period, the FSCA received only 355 applications for registration. Among these, 59 have been granted approval, while 262 are undergoing rigorous vetting processes. Regrettably, 34 applications have been withdrawn by the applicants. Notifications regarding the status of pending applications are expected to be issued soon.

The primary reasons for the rejection of applications stem from inadequacies in two key areas: insufficient skills and experience among applicants, and deficiencies in their business plans. Analysis of the applications reveals a predominant focus on offering services in various domains, including advisory services on diverse crypto assets, operation of crypto exchanges, provision of digital wallet services, crypto arbitrage, facilitation of international crypto payment gateways, tokenization, and digital proof of ownership, as well as the creation of investment baskets comprising crypto assets.

The licensing of crypto service providers underscores South Africa’s progressive approach towards regulating the crypto industry. This initiative represents a further easing of regulatory constraints in the country’s crypto landscape.

In August 2022, the South African Reserve Bank (SARB) issued guidelines outlining how financial institutions, including banks, could engage with crypto clients. Additionally, in October 2022, the FSCA classified crypto assets as financial products, subjecting them to its regulatory purview. This paved the way for the commencement of license applications in June 2023.

The FSCA has the right to conduct inspections prior to approving licenses, particularly for businesses adopting non-traditional models beyond conventional fiat systems. These inspections serve several purposes, including gaining a comprehensive understanding of the business model, verifying compliance with stipulated standards, ensuring investor and consumer protection, assessing risk management capabilities, testing business continuity measures, and confirming adherence to contractual obligations.

Stakeholders in South Africa’s cryptocurrency ecosystem anticipate that the regulatory framework and licensing regime will catalyse several positive outcomes, including increased adoption of cryptocurrencies, heightened investor confidence, broader acceptance by both retail and institutional investors globally, enhanced consumer protection, and positioning South Africa as a leader in crypto regulation.

Furthermore, the regulatory framework is expected to create numerous opportunities within the local crypto industry, foster institutional engagement and investment, enable traditional financial institutions to incorporate crypto assets into their offerings, empower financial advisors to provide informed guidance on crypto asset investment, enforce consumer protection measures, and grant explicit authority to the Reserve Bank’s financial surveillance department to oversee crypto asset trading platforms.

Following approval, licensed entities will be subject to ongoing monitoring and supervision by the FSCA. Compliance with the rules, regulations, and code of conduct outlined in the FAIS Act will be mandatory, emphasizing transparency, disclosure, and product suitability tailored to individual customers. Notably, pension funds and collective investment schemes are prohibited from investing in cryptocurrencies as per FSCA regulations.


Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.