Crypto assets are finally being included as financial products in South Africa, according to a recent notice from the Financial Sector Conduct Authority.
Crypto assets will be treated as financial products to make it easier for regulators to monitor the market and help to safeguard consumers.
The notice defines crypto assets as “a digital representation of value” that is not issued by a central bank but can be traded, transferred or stored electronically by natural or legal persons for the purpose of payment, investment and other forms of utility.
The announcement is the first legal step that was required to bring the crypto asset industry within the South African legal framework, said Brent Peterson, head of legal at Easy Crypto, a crypto exchange.
The notice takes effect immediately and falls under the Financial Advisory and Intermediary Services Act.
The declaration comes as governments around the world push to regulate cryptocurrencies to protect users from turbulent digital coins and fraudsters. US regulators and lawmakers are studying ways to guide the operation of stable coins.
“The licensing requirements that will follow from this classification will drive high standards in the industry, particularly in relation to consumer protection, with potential investors easily able to identify those providers that satisfy regulatory requirements,” Marius Reitz, general manager for Africa at crypto platform Luno, said in an emailed statement.
“Another key benefit is that it should allow financial advisers to formally advise their clients on crypto investments.”
According to the findings of the Pet Rock Investments 2022 Benchmark Survey of Financial Advisor Attitudes Towards Crypto Assets, clients are buying crypto en masse without asking their advisors: Up to two-thirds of clients (66%) are investing in crypto on their own.
With regulation, this introduces an entirely different dynamic between advisors and their clients. There is now a clear gap to fill between client expectations and their willingness to invest in crypto and advisors who need to support and service their clients.
The South African Reserve Bank has been working with other regulators to recognise the coins as financial products in order to make them easier to monitor from a money-laundering and terror-financing perspective.
“This step would aid clarity, user protection and much-needed confidence in the ecosystem,” said Hannes Wessels, country head for cryptocurrency exchange Binance South Africa.
Source: Business Tech, FA News, image from Twitter: @Maddox_coin