South Africa’s Financial Watchdog Pushes For Local Offices Of Foreign-Based Crypto Firms
Since cryptocurrencies were categorized as financial products last year, the FSCA highlights a lapse in oversight and aims to address this by requiring companies to establish a physical presence within the country.
By Anna B Kiwanuka
The Regulatory body in South Africa is urging cryptocurrency startups operating in the country from foreign headquarters to establish local offices. The goal is to ensure better oversight and accountability.
According to a recent report by the Financial Sector Conduct Authority (FSCA), approximately 10% of virtual currency service providers in South Africa have their main operations based abroad. Since cryptocurrencies were categorized as financial products last year, the FSCA highlights a lapse in oversight and aims to address this by requiring companies to establish a physical presence within the country.
The FSCA defines crypto assets as digital representations of value that are tradable, transferable, or storable electronically by individuals and entities for payment, investment, and various utilities. Recognizing the need to adapt the regulatory framework to adequately address crypto-specific risks while fostering innovation remains a priority.
The FSCA’s Crypto Assets Market Study further outlines the distribution of these crypto startups’ headquarters across cities in the country, with Cape Town taking the lead, followed by Johannesburg, Pretoria, and Durban, respectively. Revenue generation for crypto asset financial service providers primarily revolves around trading fees, closely resembling traditional financial models.
The study also notes that the most popular crypto assets offered by these startups in South Africa include unbacked cryptocurrencies and stablecoins. Earlier directives from the FSCA mandated crypto financial service providers to acquire licenses by November’s end, warning that entities without permits would be ineligible to operate in the country by 2024. The regulatory body has been processing around 128 applications and aims to review an additional 36 by December.
In an effort to distance itself from past money laundering cases that led to South Africa’s inclusion in the International Financial Action Task Force’s watchlist, the FSCA sees establishing a robust regulatory framework for virtual currencies as crucial in safeguarding the country from potential global financial scrutiny.