The Financial Sector Conduct Authority (FSCA) is planning to introduce strict measures to regulate cryptocurrency exchanges, advisors, and brokers.
The FSCA recently published a draft declaration of crypto assets as a financial product under the Financial Advisory and Intermediary Services Act (FAIS).
What this means is that cryptocurrency exchanges, advisors, and brokers will have to become registered financial services providers (FSPs).
South African financial services providers are subject to regulation under the FAIS which is administered by the FSCA.
Speaking to CNBC Africa, divisional executive investigations and enforcement Brandon Topham said the planned declaration will help them to regulate the industry.
The cryptocurrency world is currently an unregulated environment which allows unscrupulous companies to take advantage of vulnerable South Africans.
There have been numerous cryptocurrency scams which have resulted in thousands of “investors” losing a lot of money.
Topham said the planned declaration will help them to clamp down on these crypto scams in South Africa.
When the declaration of crypto assets as a financial product comes into force, crypto exchanges, advisors, and brokers will have to be registered as FSPs with the FSCA.
Unless this is done, the crypto platforms and advisors will commit a criminal offence.
He added the crypto platforms and advisors will be forced to advise people about the risk associated with investing in cryptocurrencies.
“We want to make sure that people really understand the true impact of what they are getting themselves into,” said Topham.
It is not an investment or traditional asset class – Topham
Topham said the draft declaration should not be seen as the FSCA officially classifying cryptocurrencies as an asset class or giving it legitimacy.
In fact, Topham said, he does not view cryptocurrencies as an investment or a credible asset class.
“I am very sceptical of an asset class which has nothing behind it, nobody behind it, and not even an address anywhere in the world,” he said.
“People must not see in any way that we are giving a rubber stamp of approval to crypto assets.”
He added that their view does not change the fact that many people are investing their savings in cryptocurrencies.
This is partly why the Crypto Assets Regulatory Working Group (CAR WG) are looking at ways in which aspects of the crypto environment can be regulated.