According to a recently published South African government gazette, crypto assets have been declared as financial products under the country’s Financial Advisory and Intermediary Services (FAIS) Act.
The declaration became effective on October 19 after being signed by Unathi Kamlana, Commissioner of the Financial Sector Conduct Authority (FSCA).
The declaration, which has received positive feedback from some participants in the South African cryptocurrency market, is applicable to any digital representation of value that is not issued by a central bank but can be electronically traded, transferred, or stored by both natural and legal persons for the purpose of making payments, making investments, or serving other purposes.
Additionally, the declaration comes just a few months after the deputy governor of the South African central bank, Kuben Naidoo, revealed that his institution would be treating crypto assets as financial products. According to the deputy governor, such treatment would allow the South African Reserve Bank to regulate crypto assets.
Reacting to the news, Farzam Ehsani, the founder and CEO of South African crypto exchange platform Valr, offered his perspective on what he thinks prompted this move. He tweeted:
“The reason for the declaration was cited as being due to the ‘mounting risk in the crypto asset environment’ but it also looks like this action was done to comply with a Financial Action Task Force (FATF) deadline for remediation of recommendations for South Africa. Recommendations not fully remediated or significantly progressed by October 2022 can lead South Africa to be placed on the FATF grey list, which could have materially negative consequences for the country as a whole.”
According to Ehsani, one consequence of this declaration is that crypto asset service providers (CASP) such as exchanges, now need to apply for a license under the FAIS Act. This has to be done between June 1, 2023, and November 30, 2023.
In addition, CASPs will also be required to share information with the FSCA upon request.
The Valr CEO added,
“Overall this is a positive step for the crypto industry and South Africa in general. This Declaration will open the door to many of the large traditional financial institutions (TradFi) in South Africa to start providing crypto products and services.”
The CEO further stated that the declaration brings regulatory clarity, something which has been lacking.