South Africa is leading the way among African countries by introducing a new licensing structure embedded with comprehensive regulatory framework for cryptocurrency exchanges. The Financial Sector Conduct Authority (FSCA), South Africa’s financial watchdog, expects all crypto exchanges to be registered and fully licensed by the end of 2023.
Without compliance, crypto firms could face a series of repercussions such as being mandated to shut down operations or be liable to pay significant fines. This stance from the FSCA is a strategic move to safeguard customers from potential harms related to cryptocurrency trading. Subsequent to the announcement, there’s been a rush of firms applying— totaling 20 within the first fortnight.
This places South Africa among early initiators such as the EU lawmakers who introduced the Markets in Crypto Assets (MiCA) in May and Hong Kong which had recently added new crypto exchange licensing guidelines. The move to ensure crypto exchanges operate amidst stringent regulations has not just been a domestic but also a global trend. Inevitably, multinational exchanges, like Binance, operating in South Africa will need to comply with these regulations to retain their business continuity.
A heightend sense of urgency in establishing foolproof regulatory environments spiked following the FTX-triggered crypto-wide mayhem. Incidents like these have brought to light the absolute necessity for stringent monitoring of crypto market actors.
Moreover, South Africa has been a hotspot for a number of considerable crypto scams, such as the Africrypt incident that resulted in the loss of 70,000 BTC in 2021, and the fraudulent Mirror Trading International Proprietary scheme, which saw investors lose billions of dollars’ worth of BTC. These events, amid others, have amplified the call for a robust regulatory environment within the crypto sector.
This need for vigilance is echoed by the FSCA’s collaboration with an inter-governmental fintech working group—comprising key financial sector regulators and policymakers like the National Treasury and the South African Reserve Bank—indicating an even greater commitment to security and transparency.
However, despite clear directives from central bank urging reconsideration, South African lenders continue to refrain from offering services to crypto platforms due to the associated risks. Whether this layered safety cushion will eventually lead to a healthier, transparent crypto sector is something that only time will unravel. As for the effectiveness, as stated by Kamlana from FSCA, continuous refinement and changes are bound to follow based on the evolving needs of the crypto landscape.
Source: Cryptonews
