South Africa will look at crypto assets as financial products to make it easier for regulators to monitor the market and protect consumers. The Financial Sector Conduct Authority, in a gazette notice, defined crypto assets as a digital representation of value. It said a crypto asset can be traded, transferred, or stored electronically for purposes of payment, investment, or other forms of utility.
The announcement is seen as the first legal step to bring the crypto asset industry within South Africa’s legal framework. This comes as governments across the world push to regulate cryptocurrencies to protect users from troublesome digital coins and fraudsters.
Marius Reitz, the general manager for Africa at Luno, says the licensing requirements that will flow from this classification will bring about high standards in the industry. Investors will easily be able to identify providers that meet regulatory requirements. Reitz believes a key benefit is that it allows financial advisers to formally advise their clients on crypto investments.
However, South Africa doesn’t have many crypto investors. According to Global Web Index, 15% of the population invested in Bitcoin in 2020. The crypto industry plunged, including the fall of Mirror Trading International in 2021 with losses going up to USD 1.2 billion. As such, the South African Reserve Bank is working with other regulators to recognize cryptocurrencies as financial products. This is part of its effort to monitor the money laundering and terror-financing perspective. Hannes Wessels, country head for Binance South Africa, believes the initiative will aid clarity, and user protection and bring about much-needed confidence in the ecosystem.