South Africa will require that crypto exchanges in the country operate with licences by the end of the year, according to the country’s financial regulator.
The Financial Sector Conduct Authority has received about 20 applications since opening for licences a few weeks ago, with more expected before the deadline of 30 November, FSCA commissioner Unathi Kamlana said in an interview. The regulator plans to take “enforcement action” that could see the firms being closed down or fined, if they continue to operate without a licence past the deadline, Kamlana said.
“There is potentially serious harm to financial customers when using crypto products, and therefore it makes sense for us to introduce the regulatory framework,” Kamlana said. “Time will tell the effectiveness of our measures, and we will continue to work together with the industry to refine and make changes where and if necessary.”
The country is the first on the continent to require that digital asset exchanges secure licences. Several of the continent’s biggest trading venues emerged from South Africa, including Luno, owned by Barry Silbert’s Digital Currency Group, and Pantera-backed VALR. Other global platforms such as Binance operate in the country and will need to secure licences.
Regulators and policymakers across the world have been tightening rules governing the cryptocurrency sector following a string of company collapses which culminated in the bankruptcy of Bahamas-based exchange FTX. In April, European lawmakers gave their final blessing to the EU’s Markets in Cryptoassets, or MiCA, a law that will give the bloc its first rules for the crypto industry, while last month Hong Kong implemented new regulations to licence exchanges.
Crypto scams
Over the past few years, South Africa has been the backdrop to several of the world’s largest crypto scams that resulted in the disappearance of billions of dollars in investments. This includes the vanishing 70 000 bitcoin in 2021 from a platform called Africrypt, which was run by the Cajee brothers, and fraudulent multilevel marketing scheme Mirror Trading International.
The FSCA has been active on crypto and fintech regulations, working with an “intergovernmental fintech working group” that includes the country’s biggest financial sector regulators and policymakers such as national treasury and the South African Reserve Bank.
Part of the measures to protect consumers include financial education and raising public awareness around cryptocurrency products, Kamlana said. “It is an area where you can lose quite a bit of money so you must think twice before exposing yourself to it,” he added. — Loni Prinsloo and Adelaide Changole, with Amogelang Mbatha, (c) 2023 Bloomberg LP