Crypto crackdown in South Africa

The Financial Sector Conduct Authority (FSCA) is investigating thirty cases of people or entities unlawfully offering crypto financial services.
This comes after the South African regulator declared crypto assets a financial product on 19 October 2022.
At the same time, it announced that it would begin accepting applications for crypto asset service provider (CASP) licences from 1 June 2023.
Existing players were given a grace window, allowing them to keep operating so long as their licence applications were lodged before 30 November 2023.
They also had to operate according to the prescripts of the Financial Advisory and Intermediary Services (FAIS) General Code.
“The FSCA has received numerous crypto asset service provider licence applications, including both new applications and variations to existing licenses,” the regulator said in a recent regulatory actions report.
“Several of these applications have been approved, some have been declined, and a number have been voluntarily withdrawn by the applicants.”
The FSCA said its enforcement division established an investigation team to deal specifically with anyone conducting crypto financial services unlawfully.
This includes those who didn’t apply for a licence or whose licence applications were declined and have continued to trade regardless.
“In the interest of protecting the public and in support of fairness in the industry, the FSCA will act decisively against unlawful CASPs,” the regulator warned.
“The FSCA will make the outcome of its investigations known and will publish warnings if it discovers unregistered crypto business.”
It also noted that there are still many applications under consideration.
In a statement issued last week, the FSCA revealed that it had received 383 licence applications, of which five had been declined.
“Key reasons for CASP licence applications being declined to date relate to applicants having failed to meet the applicable fit and proper requirements under the FAIS Act,” the FSCA explained.
It highlighted the following areas that disqualified entities from receiving a CASP licence:
- Operational ability requirements, i.e., failure to provide clear and comprehensive business plans and business model descriptions outlining crypto asset activities and key business and operational frameworks to support such activities.
- Competency requirements, i.e., failure or inability to demonstrate the requisite knowledge and practical experience pertaining to crypto assets.
“Institutions that have voluntarily withdrawn their applications or that have had their applications declined by the FSCA are welcome to re-apply in the future,” the regulator stated.
It said such applicants will receive their licence provided they can demonstrate full and proper compliance with the applicable licensing requirements.
However, in the meantime, they are not allowed to offer crypto asset services in South Africa.
“Any institution or person found to be undertaking such activities without authorisation will be subject to regulatory action by the FSCA,” it warned.
“This does not apply to those institutions or persons that submitted their licence application by 30 November 2023, and that are still awaiting the finalisation of their applications by the FSCA.”
The FSCA said it has approved another 63 CASP licence applications since April 2024, bringing the total licensed entities to 138.
“A further 80 applications have been voluntarily withdrawn by applicants following engagements with the FSCA on the appropriateness of their respective business and operating models,” the regulator said.
The FSCA also released its complete list of CASP licensees as of June 2024.
It also issued a reminder that its licensing powers are limited to the authorisation and supervision of CASPs insofar as they render financial services related to crypto assets as defined under the FAIS Act.
This includes advice, and intermediary and investment management services.
The FSCA emphasised that its authorisation does not include the recognition of crypto assets as a legal form of tender.
“The South African Reserve Bank does not currently recognise crypto assets as currency. Any media reports implying otherwise are therefore incorrect,” the FSCA said.