On October 19, South Africa’s Green Gazette, the government’s gazette of records, issued a notice on the country’s policy towards cryptocurrency.
The Financial Sector Conduct Authority (FSCA), the financial regulatory body in South Africa, suggested that the country’s 2002 Financial Advisory and Financial Intermediary Services Act (FAIS) be amended to include a definition of crypto assets. The inclusion of a definition of crypto assets has been expected and awaited for a while; however, it is for the first time South Africa has taken the initiative to regulate crypto assets.
As per the notice, FSCA defined crypto assets as a “digital representation of value” that can be traded electronically, transferred, and stored but is not issued by a central bank. Further, it stated that the crypto adheres to cryptographic techniques and uses distributed ledger technology. The notice also declared the crypto assets as financial products following the country’s national treasury suggestion from February 2022. It showed interest in announcing cryptocurrency as a financial product with its transactions to be efficiently monitored and regulated.
Under the financial act (FAIS), a financial product is defined as a security, debenture, “any money-making instrument,” or an instrument giving rights to existing securities and instruments. Additionally, domestic or international financial service providers can offer a financial product but should be licensed in South Africa. However, the regional media and press described the registration process as extensive and lengthy.
As the Chainalysis 2022 Global Crypto Adoption Index announced in September, South Africa ranked 30 globally for cryptocurrency adoption. Data from various sources also suggest that approximately 10-13% of the nation’s population owns cryptocurrency, and about 2.08 million people own Bitcoin, as reported by Todayq.
South Africa has maintained a positive outlook on crypto assets for a long time, given its timeline with crypto regulation. In November 2020, a national draft declaration on cryptocurrency was published, followed by the creation of a regulatory framework in June 2021. In August 2022, the national banks also showed signs of collaboration with crypto companies contrary to the ban on some customers from using their credit and debit cards to purchase cryptocurrencies on foreign exchanges.
The efficient implementation of regulations will help the nation combat the issues of money laundering, scams, theft, etc. Further, it will also comply with the nation’s standards of Anti-Money Laundering/Know Your Customer to protect the interest of investors; however, the details regarding it have sparked some controversy in the nation.