South Africa’s financial sector regulator published in the government gazette that crypto assets are now treated as financial products under South Africa’s Financial Advisory and Intermediary Services (FAIS) Act.
The declaration became effective and a binding law when the Financial Sector Conduct Authority (FSCA) commissioner, Unathi Kamlana, appended his signature.
Since the digital asset is now considered a financial product, it will be treated alongside other regulated financial products. South African citizens can now hold crypto and freely engage in its trading.
How Crypto Became a Financial Product
Since the FSCA’s declaration, it is expected that the adoption of digital assets will increase in South Africa. The government now duly recognizes the trading, exchange, and crypto investment and is governed by the laws binding other financial products.
According to the FSCA declaration, crypto is a distributed ledger technology-based asset not issued by a Central bank and employing cryptographic techniques. Similarly, the digital asset must be tradeable and be stored electronically for payment purposes, investment, or other utility cases.
The Financial Advisory and Services Act of 2002 defined financial products as any money-market instrument, company shares, securitized debt, and securities, among other things.
Since the cryptocurrency falls under this category and the regulatory body deems it worthy of being added to the category, the Government officially recognized it as a financial product.
Another reason industry players and experts are tipped to have necessitated the recognition of crypto as a financial product is a mounting risk in the crypto asset environment.
Undoubtedly, the crypto market has spread globally, and the embrace keeps increasing. So countries that seemed opposed to cryptocurrency were “sitting on a time bomb.”
The Financial Action Task Force (FATF) had set a September deadline for compliance, and failure to comply means countries like South Africa that do not give legal recognition to crypto will be greylisted.
Therefore, South Africa was believed to play a fast game by recognizing crypto as a financial product before the October deadline.
The recognition of crypto as a Financial product by the Financial Sector Conduct Authority (FSCA) is a welcome development and is long overdue. It opens more opportunities for stakeholders and multinationals to expand the country’s digital assets, products, and service delivery.
However, such regulation implies that these service providers and stakeholders must now apply for licenses and await approval from the relevant regulatory bodies.
The FAIS act compels all crypto asset service providers (CASP) to apply for a license between June 1, 2023, and November 30, 2023.