South Africa’s Financial Services Conduct Authority (FSCA) has indicated that the first 59 licences are almost ready to be awarded, which would grant these companies the right to operate as crypto assets financial services providers. About 262 applications are in progress. Crypto assets were declared as financial products in terms of the Financial Advisory and Intermediary Services Act, 2002 (FAIS) by the FSCA in 2023.
South Africa’s largest crypto exchange, Luno, has applied for its licence and the FSCA has indicated that all those awarded will be informed in due course. Christo de Wit, Luno’s country manager for South Africa, unpacks how including crypto assets under FAIS’s regulatory and licensing framework is likely to progress the industry, creating a myriad of opportunities and making crypto more accessible to all.
Greater adoption in the mainstream financial system
“It is groundbreaking that crypto is now becoming part of the mainstream financial services sector in South Africa as a regulated financial product. A substantive regulatory framework on crypto assets will boost confidence among investors, institutions, and the public.”
Traditional institutions which are already licensed financial service providers will be able to include exposure to crypto assets in their offerings by adding the crypto assets category to their existing licences. Licensed banks and asset managers can introduce crypto assets to their very large customer bases and financial advisors can advise their clients about responsible crypto asset investing.
In addition, traditional financial institutions can include exposure to crypto for their clients by partnering and engaging with experienced, credible and soon to be licensed firms like Luno. As a regulated financial product, crypto assets will more likely form part of investment portfolios. In this way, regulation has cleared a path for greater adoption of crypto assets in the mainstream financial system.
Protection for consumers and higher standards
There are millions of crypto users in South Africa who need to be able to easily identify providers that meet regulatory requirements. Licensing will raise standards, set barriers to entry for fly-by-night operators and protect consumers. Licensed service providers will need to ensure that their systems and processes meet regulatory standards.
Luno is also registered as an Accountable Institution with the Financial Intelligence Centre and complies with all measures to counter financial crime, as well as global anti-money laundering (AML) and know-your-customer (KYC) requirements. These help to prevent illicit activities and protect consumers from fraud, scams, and money laundering schemes.
De Wit adds, “Regulation is a vital part of the cryptocurrency ecosystem. Finding the right balance between regulation and innovation is a complex challenge that regulators, industry participants, and stakeholders are navigating together to foster a healthy and sustainable crypto ecosystem. South Africa is ahead on the continent and even internationally, in terms of regulators engaging with the industry, tabling regulatory proposals and implementation.
This regulatory and licensing framework is the start of a new chapter for our industry and we look forward to more institutional engagement and investment, bringing South Africans more ways to safely invest and enjoy the benefits of crypto assets.”
