South Africa’s Financial Sector Conduct Authority (FSCA) has mandated that all crypto exchanges register and obtain operational licenses by the end of 2023.
According to the regulator, firms that fail to comply with this guideline and continue operating without a license will face the possibility of closing down or paying fines.
The FSCA received about 20 applications following two weeks of opening license registrations.
The FSCA Introduces New Crypto Exchange Licensing Guidelines to Protect Customers
Kamlana said during an interview in Pretoria that there is potential serious harm to financial customers when using crypto products, and therefore, it makes sense for us to introduce the regulatory framework.
Time will tell the effectiveness of our measures, and we will continue to work with the industry to refine and make changes where and if necessary, he added.
South Africa became the first African country to mandate crypto exchanges to secure licenses. Most of Africa’s top trading platforms sprouted from South Africa. These include Digital Currency Group’s subsidiary Luno and Pantera-backed VALR.
Other global crypto exchanges like Binance have branches in South Africa and will now need a license.
Christo de Wit, manager of Luno’s South African unit, says the firm has submitted its license application and awaits feedback from the FSCA.
Stringent Scrutiny on Crypto Exchanges
Policymakers and regulators across the globe have moved to tighten their reign on the crypto industry.
The need for stringent rules and comprehensive scrutiny of crypto exchanges accelerated after the FTX-engineered crypto-wide mayhem.
Several global regulators have introduced rules to govern the crypto market. For instance, in May, EU lawmakers adopted the Markets in Crypto Assets (MiCA) regime, the region’s first comprehensive rules dedicated to the crypto industry.
Also, last month, Hong Kong implemented new guidelines for crypto exchange licensing.
South African Regulators Seek More Transparency in Crypto to Eliminate Bad Actors
Moreso, the scam prevalence in South Africa’s crypto industry prompted the regulator to introduce measures to protect investors.
South Africa has featured in the scene of most of the world’s largest crypto scams that wiped billions of dollars in investor funds.
Among these is the loss of 70,000 Bitcoin in 2021 from Africrypt, the Cajee brothers’-owned platform.
The Africrypt incident is among the world’s largest crypto heists. Another case study is the Mirror Trading International Proprietary, a fraudulent multilevel marketing scheme that saw users lose billions of dollars in Bitcoin.
After these incidents, the FSCA awakened to crypto and fintech regulations. The regulator collaborated with an “inter-governmental fintech working group,” including South Africa’s top financial sector regulators and policymakers.
These include the National Treasury and the South African Reserve Bank.
Meanwhile, South African lenders do not offer services to crypto platforms due to the associated risks.
However, the central bank has told them to reconsider their stance to allow for more transparency in the crypto sector.
Kamlana said, there’s better transparency if you are in the formal sector controlled by an entity as tightly regulated as a bank.
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