South Africa regulator drafts bill to regulate digital currency service providers

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South Africa’s financial services watchdog is seeking to rein in digital currency service providers. In its draft bill, the Financial Sector Conduct Authority (FSCA) is proposing that all service providers register as financial service providers.

The draft bill comes at a time when digital currency adoption in the country is soaring, the regulator noted.

“Globally there is rapid growing interest by retail investors to purchase crypto assets. South Africa has also experienced an exponential increase in the provision and use of crypto assets,” the FSCA stated.

In response, the watchdog has been working with the Crypto Assets Regulatory Working Group on regulations for the industry. The result is a draft declaration by the FSCA that will recognize digital currencies as a financial product. This will allow the regulator to demand that all service providers apply for a financial services provider license.

“The Declaration would have the effect that any person furnishing advice or rendering intermediary services in relation to crypto assets must be authorized under the FAIS Act as a financial services provider, and must comply with the requirements of the FAIS Act. This will include crypto asset exchanges and platforms, as well as brokers and advisors.”

The FSCA believes that the implementation of the draft declaration will lead to “improved disclosures to customers that more effectively highlight the high risks involved in investing in crypto assets.” The South Africa has seen thousands of investors lose hundreds of millions of dollars to digital currency scams in recent years. Many of the victims are lured by promises of “risk-free and guaranteed returns” investment plans, unaware of the risks that come with digital currency investment.

The draft declaration will change this, according to the FSCA. In addition, the declaration will force service providers to adopt a more robust advice process when they advise clients to invest in digital currencies.

“Licensing of intermediaries is also necessary to improve the quality of data for policymakers and regulators about the crypto asset environment, and to consider whether there is a need for further regulatory interventions.”

South Africa is the leader in Bitcoin SV adoption in Africa, with Centbee playing an integral role. The Johannesburg-based wallet provider has continued to engage with regulators to introduce regulations for the industry, in line with BSV’s core principal of being regulatory-friendly. As Centbee co-founder Angus Brown stated in his panel discussion at CoinGeek Live, “The light of regulations will drive the shadows to the corners.”

"The light of the regulations will drive out the shadows" ~ @angusjbrown #CGLive #OneWorldOneChain pic.twitter.com/11vfpH75hN

— Centbee (@Centbee) October 2, 2020

See also: Centbee briefing by Lorien Gamaroff and Angus Brown at CoinGeek Live