The Financial Sector Conduct Authority (FSCA) is preparing to regulate cryptocurrency assets in South Africa by collecting detailed information about the industry and getting crypto platforms licenced.
Its study revealed that over 5.8 million South Africans own crypto assets, with unbacked assets such as Bitcoin being the most popular.
“It will place us in a position where we know how we could respond in terms of our regulatory frameworks, licencing of products, and supervision,” head of the regulator’s fintech division, Awelani Rahulani, told Newzroom Afrika.
In October 2022, the FSCA declared cryptocurrencies a financial product, allowing crypto trading platforms to become licenced and placing them under its regulatory purview.
Rahulani emphasised that the crypto trading industry is still small compared to the traditional finance sector.
However, this does not mean that the industry does not pose a risk to financial stability as crypto products are used by ordinary South Africans who also engage with the broader economy and traditional finance sector.
“This has put us in a position whereby we have to put measures into place to make sure that we are about to regulate and monitor this space very closely,” Rahulani said.
The regulatory journey began in 2014 when the Reserve Bank issued a position paper warning South Africans about the risks of investing in crypto assets.
Later that year, the FSCA, Financial Intelligence Centre, SARS, and the Reserve Bank warned consumers about participating in crypto trading and its potential impacts on the financial system.
This has evolved into an active approach to regulation, with the FSCA declaring crypto as a financial product officially in October last year.
“There has been a movement away from a ‘wait and see’ approach to more active regulation. We plan on regulating the space,” Rahulani said.
Following the study revealing the relatively widespread adoption of crypto in South Africa, the FSCA has almost been forced to act.
“It will place us in a position where we know how we could respond in terms of our regulatory frameworks, licencing of products, and supervision,” Rahulani said.
“We are monitoring the sector very closely and definitely have the enforcement within the organisation.”
The majority of crypto trading platforms used in South Africa are based in the country, which Rahulani said will make it easy for the FSCA to regulate in the future.