South Africa Announces 30 Cryptocurrency Investigations

Politics

Jul 2, 2024 at 2:01 PM

Updated: July 2, 2024 at 7:17 PM

2 minute read

The FSCA has formed a special team to investigate unlicensed crypto services as part of its ongoing regulatory efforts. There are 30 cases under review as South Africa seeks to balance innovation and compliance.

Image: FSCA; Nathanaelginting

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Editor’s note: This story has been updated to include the news announced by the South African FSCA 63 new crypto licenses on July 2, shortly after this story was published.

South Africa’s Financial Sector Conduct Authority (FSCA) has stepped up its scrutiny of the cryptocurrency sector, launching 30 investigations into unauthorized financial services related to cryptocurrencies. The regulator noted this in its latest regulatory action report.

This development comes as the country’s cryptocurrency regulatory framework takes concrete shape, with the first licenses recently issued to compliant companiesOn July 2nd, the The FSCA has announced that it has granted 63 additional licencesbringing the total number of crypto licenses in South Africa to 138.

Driving the news

• THE The FSCA has declared cryptocurrencies to be financial products in October 2022, requiring cryptocurrency providers to apply for a Financial Service Provider (FSP) license. The declaration mandated licensing for cryptocurrency exchanges and marked a pivotal moment in South Africa’s cryptocurrency regulation journey.
• The regulator has granted a grace period which ends on November 30, 2023, for the submission of license applications. The first set of licenses was issued in the first quarter of 2024. Cryptocurrency exchanges Luno and Valr are among the first to receive this crucial authorization.
• The FSCA’s enforcement division has now established an investigative team to address cases involving entities offering cryptocurrency-based financial services without the proper license.

Revealing quote

“In the interests of public protection and in support of fairness in the industry, the FSCA will take decisive action against illegal activities. [crypto asset service providers] CASP. … There are currently 30 cases under investigation.”

• The regulator also plans to make the results of its investigations public and issue warnings about unregistered cryptocurrency companies.

Because matter

• The FSCA’s crackdown on illicit cryptocurrency activity is part of a broader effort by South Africa to address the Financial Action Task Force’s (FATF) concerns about money laundering and terrorist financing risks.

• South Africa is one of 12 African countries currently on the FATF grey list.
• The country’s push towards cryptocurrency regulation has made significant progress after the South African Reserve Bank (SARB) authorized financial institutions to serve cryptocurrency clients, demonstrating a cautious but progressive approach to cryptocurrency integration.
• Only after the SARB statement did the FSCA declare cryptocurrencies as financial products.

Good to know

In addition to cryptocurrency-specific concerns, the FSCA report outlines several other areas of concern that could impact the broader cryptocurrency ecosystem:

• Copy trading and signalsRegulator sees rise in unlicensed entities offering high-risk derivatives trading services, including copy trading and signal provision.
• Financial Influencers:The rise of financial influencers on social media platforms has attracted the attention of the FSCA, with concerns about potential misinformation and scams.
• Online damages:The FSCA highlights the growing sophistication of online scams, including deepfake technologies and the impersonation of legitimate FSPs and regulators.
• Anti-Money Laundering (AML) Compliance:The regulator stresses the importance of implementing robust risk management and compliance programs (RMCPs) to combat money laundering and terrorist financing.

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