South Africa’s Financial Sector Conduct Authority (FSCA) recently made a significant announcement regarding the regulation of crypto asset service providers (CASPs) in the country. The FSCA disclosed that it has approved the licences of 248 firms to operate as CASPs, while rejecting nine applications. Additionally, there are 56 pending applications that are still under review.
The licensing process for CASPs began on 1 June 2023, and the FSCA has received a total of 420 licence applications. Out of these, 106 applicants chose to withdraw their applications after engaging with the regulator. The reasons for the decline of CASP licence applications so far have primarily been due to applicants failing to meet the necessary fit and proper requirements under the FAIS Act.
One of the key criteria for approval was demonstrating operational ability, which included having clear and comprehensive business plans, detailed business model descriptions outlining crypto asset activities, and robust business and operational frameworks to support these activities. Additionally, applicants were required to showcase knowledge and practical experience in the field of cryptocurrencies.
While some companies had their applications declined or voluntarily withdrew, the FSCA stated that they can reapply once they can prove full compliance with the licensing requirements. It is crucial for licensed firms to also fulfill the regulatory examination requirements by 30 June 2025, failure of which could result in regulatory action such as suspension or withdrawal of authorization.
It is worth noting that South Africa stands out as one of the few African countries that have established regulations for cryptocurrency companies. The FSCA does not permit unlicensed firms to operate within its jurisdiction, except for those with pending applications. Despite recognizing cryptocurrencies as digital representations of assets that can be traded or stored electronically, the country’s central bank does not consider them as a legal form of tender.
The FSCA’s licensing powers are specifically focused on authorizing and supervising CASPs that provide financial services related to crypto assets as defined under the FAIS Act, such as advisory, intermediary, and investment management services. Earlier this year, the FSCA took action against a local CFD provider, Banxso, due to concerns over its operational practices and potential risks to clients. The regulator also emphasized that all trading signals providers operating in the country must be licensed.
In conclusion, the FSCA’s efforts to regulate the crypto sector in South Africa are essential for consumer protection and ensuring the integrity of the financial markets. By enforcing stringent licensing requirements and monitoring licensed firms, the regulator aims to promote a safe and transparent environment for crypto asset services in the country.