Declaration on crypto assets welcomed

SA’s biggest cryptocurrency group says the FSCA’s move to regulate such products is a step in the right direction

LUNO, the biggest cryptocurrency group in South Africa, welcomed the publication by the Financial Sector Conduct Authority (FSCA) on Friday of a draft declaration of crypto assets as a financial product under the Financial Advisory and Intermediary Services (FAIS) Act.

Globally there is rapidly growing interest by retail investors to purchase crypto assets. South Africa has also experienced an exponential increase in the provision and use of crypto assets, the FSCA said in a statement on Friday.

Luno general manager for Africa Marius Reitz said they welcomed the draft declaration and cryptocurrencies were increasingly demonstrating the significant role they could play in the future of money.

He said they support regulation in the industry, because it made it possible for consumers and professional services such as auditors to be confident they were dealing with a product defined by regulatory standards and that licensed crypto products have passed through a vetting process.

The FSCA said the manner in which crypto assets can be regulated has been under consideration by the National

Treasury and relevant authorities for a number of years.

Last year, the Crypto Assets Regulatory Working Group (CAR WG), which comprises members of the National Treasury, South African Reserve Bank and Prudential Authority, FSCA, Financial Intelligence Centre, National Credit Regulator and SA Revenue Service, published a Position Paper which proposed a number of recommendations about the regulation of crypto assets.

The draft declaration is intended to give partial effect to some of the recommendations in the paper, by declaring crypto assets as a financial product under the FAIS Act.

The declaration means any person furnishing advice or rendering intermediary services in relation to crypto assets must be authorised under the act as a financial services provider, and must comply with the requirements of the act. This will include crypto asset exchanges and platforms, as well as brokers and advisers.

Licensing of intermediaries is also necessary to improve the quality of data for policymakers and regulators about the crypto-asset environment, and to consider whether there is a need for further regulatory interventions.

The draft declaration does not impact the status of crypto assets in the context of other laws such as exchange control, the Pension Funds Act and Collective Investment Schemes Control Act and so forth, nor does it attempt to regulate, legitimise or give credence to crypto assets.

The FSCA said the draft declaration was merely intended to be an interim step in mitigating certain immediate risks in the crypto assets environment pending the outcome of broader developments taking place through the working group, which would inform future policy interventions to be implemented across a variety of regulators and laws.