South Africa’s FSCA issues draft declaration on crypto-assets

With the idea of crypto-assets gaining steam across the world, the question really is which country will be left behind. South Africa seems to be the latest country to make an effort to regulate cryptocurrencies after the FSCA, the country’s premier financial regulator, issued a declaration that stated that the country intends to treat cryptocurrencies as a financial product.

Observing that there is rapid, growing interest among retail investors towards purchasing crypto-assets, the FSCA said,

“South Africa has also experienced an exponential increase in the provision and use of crypto assets.”

The aforementioned draft declaration is expected to result in improved disclosures to customers that more effectively highlight the high risks involved in investing in crypto-assets, while also ensuring a more robust advice process. Further, such a declaration will also ensure that proper risk assessments are done when intermediaries decide to advise customers to purchase crypto-assets.

That’s not all, however, as the same also says,

“The draft Declaration in no way impacts the status of crypto assets in the context of other laws such as exchange control regulations, requirements under the Pension Funds Act and Collective Investment Schemes Act and so forth, nor does it attempt to regulate, legitimise or give credence to crypto-assets.”

The wording here is interesting, especially since it is unusual that a country would issue a declaration assigning a status to cryptocurrencies, while also claiming that the same in no way attempts to legitimize or give credence to crypto-assets. In the regulatory agency’s defense, the FSCA has referred to this as an “interim step” between the developments taking place through the country’s Crypto-Assets Regulatory Working Group.

Interestingly, South Africa’s draft declaration is somewhat similar to Kyrgyzstan’s recently-issued draft law. Like Kyrgyzstan, South Africa’s draft declaration has also invited interested parties from the general public to comment on the draft on or before 28 January 2021.