March 28, 2024

South African regulator obliges crypto companies to obtain a license within six months

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South African regulator obliges crypto companies to obtain a license within six months

Financial Supervision Authoritysector of South Africa (FSCA) introduced a new licensing regime under which crypto companies must obtain a license to operate in the country within six months starting June 1.

The agency stated that this requirementaims not only to strengthen consumer protection, but also to raise industry standards, giving companies the confidence to innovate and create new jobs. Financial services related to crypto assets will be regulated under the Law on Financial Institutions (COFI), aimed at protecting the interests of consumers. The FSCA noted that non-fungible token (NFT) issuers, miners and node operators are currently exempt from licensing, but this will be considered in the future.

Head of Policy at Luno Crypto Exchangein Europe, the Middle East and Africa, Nick Taylor called this an important positive development for the industry and local cryptocurrency traders. However, not everyone is so optimistic.

Local crypto companies fear thatThe short time to obtain licenses and possible fines for non-compliance may lead to the closure of small organizations working with digital assets. Failure to register within the required time frame may result in a fine of 10 million South African rand (about $510,000) or up to 10 years in prison. Therefore, potential market participants may completely refuse to work in this jurisdiction. For example, the co-founder of the South African blockchain company Coronet, Shadrack Kubyane, believes that such fines could “sink” the local crypto sector.

Many cryptocurrency companies tooThey are unhappy that little time is given to prepare to comply with regulations. Although they asked the regulator to extend the application period to two years, the FSCA considered this period too long, stopping at six months. Companies are afraid that they will not have time to prepare the necessary documentation. To obtain a license, they must provide comprehensive information about their business activities, shareholders and financial status.

Let us recall that last fall the FSCA introducedamendments to legislation according to which crypto-assets are treated as financial products. Earlier this year, the South African Advertising Standards Authority (ARB) introduced new rules for cryptocurrency advertising to protect investors from misleading information.