South Africa has updated its national regulations concerning cryptocurrencies and cryptocurrency traders. As one of the largest cryptocurrency economies in Africa, find out how this impacts the trading of crypto in South Africa.
The South African Crypto Market – A Haven for Scams and Financial Crime?
According to a 2022 study by Coin Journal, South Africa is one of the largest and fastest-growing crypto economies in Africa – the country is home to 59 crypto start-ups and approximately 12.4% of the population owns crypto.
However, South Africa has high rates of financial crime in general and has also been home to several massive crypto scams. Mirror Trading International (MTI), the South African company responsible for the largest and most costly cryptocurrency pyramid scheme of 2020, was recently slapped with a R64 billion fine.
In light of these high rates of financial crime associated with crypto, the International Monetary Fund (IMF) in 2022 called for greater cryptocurrency regulation and criticised South Africa for being
Two years later, in October 2022, South Africa’s financial watchdog classified crypto assets as financial products, thereby enabling them to be regulated.
Now, roughly seven months later, cryptocurrencies and cryptocurrency traders are being hit with new regulatory compliance obligations.
New Compliance Regulations – How Does This Impact Crypto Trading?
The new regulations mean that cryptocurrency assets have been classified as financial products under the Financial Advisory and Intermediary Services (FAIS) Act, which means that they are subject to the Financial Intelligence Centre Act (FICA).
In short, FICA establishes a range of obligations for identity verification and data validation checks in line with risk assessment and due diligence regulatory guidelines.
According to CoinDesk, one of the most significant challenges for cryptocurrency trading
Failure to comply with these new regulations could mean a fine of up to 500,000 USD and/or a prison sentence of up to
How Can Businesses Ensure Regulatory Compliance?
The new regulations place several new compliance obligations on CASPs. These include the fact that…
- Cryptocurrency traders must now hold a Financial Services Provider (FSP) license.
Because Crypto Asset Service Providers (CASPs) are now designated as Accountable Institutions, CASPs must now adhere to several regulations as stipulated under the Financial Intelligence Centre Amendment Act (FICA).
Although the exact regulatory compliance obligations may vary and the following list should not be taken as legal advice, CASPs may be obligated to adhere to requirements for:
- Know Your Customer (KYC) protocols
- Identity Verification checks
- Data Validations checks
- Ongoing monitoring procedures to monitor for suspicious transactions and financial patterns
There are some exceptions to what the Financial Services Conduct Authority considers to be regulated activity. These exceptions include:
- Individuals involved in mining and operating nodes support blockchain activities without direct interaction with consumers.
- Service providers dealing with non-fungible tokens (NFTs) offer unique assets generated by specific code. While NFTs can be traded, the regulatory authority views them as posing lower risks compared to fungible tokens. There is ongoing discussion on whether NFTs should be considered as crypto assets and subject to licensing requirements in the upcoming revision of the FAIS Act.
- Entities offering financial services related to crypto asset derivatives, which are classified as securities according to the Financial Markets Act (FMA), must either hold a license under the FAIS or adhere to the regulations outlined in the FMA.
A newly regulated industry in South Africa, the new legislation has wide-ranging implications for South Africa’s well-developed cryptocurrency economy. To ensure transactional security and regulatory compliance, CASPs must invest in digital tools for identity verification and data validation.
Identity Verification and Enhanced Due Diligence Services for South Africa
ThisIsMe is South Africa’s leading provider of digital tools for tasks like enhanced due diligence, KYC, customer due diligence, data validation and risk assessment. Committed to world-class standards for data handling and data privacy, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, contact our team here.