Crypto Assets South Africa

Crypto Assets to be Treated as Financial Products in South Africa

October 21, 2022

Crypto enthusiasts in South Africa have welcomed the new development from the authorities to the effect that crypto assets are to be treated as financial products in South Africa, to make it easier for regulators to monitor the market and help to safeguard consumers.

This was made known by the Financial Sector Conduct Authority defined crypto assets as “a digital representation of value” in a gazette notice published on Wednesday.

A crypto asset isn’t issued by the central bank, but can be traded, transferred or stored electronically for purposes of payment, investment or other forms of utility, according to the announcement.

The declaration, which takes effect immediately, comes as governments around the world push to regulate cryptocurrencies to protect users from turbulent digital coins and fraudsters. US regulators and lawmakers are studying ways to guide the operation of stablecoins.

In South Africa, where Global Web Index estimates about 15% of the population invested in bitcoin in 2020, the nascent industry already saw collapses, including the demise of Mirror Trading International last year with losses totalling about US$1.2-billion.

The South African Reserve Bank has been working with other regulators to recognise the coins as financial products in order to make them easier to monitor from a money laundering and terror-financing perspective.

Kelechi Deca

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South Africa Says It Has No Plans To Ban Trading In Crypto Assets

June 6, 2021

As more individuals invest in crypto-assets, South Africa’s National Treasury says it is evaluating a range of possible regulatory paths in South Africa. The Treasury noted that crypto assets have expanded significantly in South Africa over the previous five years, with consumers predominantly investing in 12 main crypto-asset trading platforms such as Luno, Altcoin Trader, and VALR, in a recent presentation to parliament.

“Crypto-assets have become too big to ignore and pose a number of risks for consumers if not sufficiently regulated,” it said.

Here Is What You Need To Know

Treasury believes that there are at least two million retail investors in the nation using these platforms, with daily transaction volumes of R2 billion.

However, it is feared that at least half of these investors do not completely comprehend how these assets function, preferring to focus on returns of 50% or more, according to the report.

Likely Approaches To Be Adopted By The Regulator

According to Treasury, authorities in South Africa now have a choice of essentially three approaches:

A Complete Ban: A comprehensive ban is not recommended, according to Treasury, because South Africa is far past the point where this is a possible, given the broad acceptance of crypto-assets. It cautioned that a prohibition would push activities underground and need increased policing. South Africa is also a member of the Financial Action Task Force (FATF), an intergovernmental organization that mandates the country to regulate cryptocurrency service providers.

Do nothing — Treasury has stated that given South Africa’s participation in the FATF and local organizations that require consumer protection, such as the Financial Sector Conduct Authority, this is not an option (FSCA).

Regulate — According to Treasury, regulating crypto-asset operations is the only viable solution. Rather than the commodity itself, this should control the services, such as wallets and exchanges. It did warn, however, that regulation is not the same as endorsement, and that the public should be made aware of cryptos’ intrinsically volatile and dangerous character. It also recommends that crypto-assets stay unregistered as legal currency and unrecognized as electronic money.

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Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
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