South Africa’s financial regulator has shortlisted 50 virtual asset service providers (VASPs) for issuance of the country’s first-ever digital asset sector licenses.
The Financial Sector Conduct Authority (FSCA) ordered all VASPs to apply for a license by the end of November 2023 or face legal action. In December 2023, 128 companies had filed applications by the deadline.
In a recent media briefing, FSCA’s head of enforcement, Gerhard van Deventer, revealed that the watchdog had forwarded a list of 50 applicants to the licensing committee, which is expected to announce its decision “in a few weeks.”
Local sources said nearly two dozen VASPs withdrew their applications last month, with the cost of obtaining the license emerging as the most cited factor. The challenge isn’t unique to South Africa; in some jurisdictions like Hong Kong, obtaining a VASP license can cost a startup between $12 million and $20 million.
South African VASPs also cited the lack of local blockchain experts for withdrawing their applications.
With the licensing regime, South Africa will become the first in Africa to have a regulatory framework that legally recognizes and oversees the sector. Others, like Nigeria, are gradually catching up after years of an anti-digital asset stance. Nigerian startups have started applying for licenses after lifting the CBN ban.
The South African digital asset community has welcomed the licensing. Cédric Jeannot, the CEO of digital bank Be Mobile Africa, says the regime “serves the commercial interests of all parties in the ecosystem positively.”
Christo De Wit, the country manager for South Africa at Digital Currency Group (DCG)-owned Luno exchange, concurs, saying, “the requirement for licensing is a move in the right direction as it validates the operations of crypto companies.”
Regulations will stamp out ‘crypto’ crime in the country, with the latest being MMM Krypto, a scam originating in Russia that’s luring unsuspecting investors with promises of up to 36% monthly returns.
MMM Krypto is an offshoot of MMM Global, an infamous pyramid scheme founded in Russia that targeted developing countries with promises of quick riches. MMM Global was itself a rebirth of the 1990s scam MMM.
FSCA recently issued a warning against MMM Krypto, which it says offers services without a permit.
“The FSCA is concerned about the unrealistic monthly returns offered to members of the public in South Africa. MMM Krypto is not licensed under any financial sector law to provide financial products or services in South Africa. MMM Krypto was not available for comment,” the watchdog pointed out.
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