First-ever South African crypto licenses are imminent: FSCA official

South Africa is on the brink of issuing financial service provider (FSP) licenses to crypto companies, says Gerhard Van Deventer, the head of divisional enforcement at the Financial Sector Conduct Authority (FSCA). These licenses aim to safeguard users from scams as the number of South Africans using bitcoin (BTC) and other cryptocurrencies approaches about 10% of the population. 

Key quote 

Deventer told the Moneyweb Crypto podcast: 

“All in all, my colleagues in the licensing division tell me that we’ve received 145 applications. So, 50 of those were presented at the licensing committee [meeting] in December. So the results of those applications will be seen in the next few weeks.” 

Of note: Deventer’s 145 claim differs from the 128 crypto license application the FSCA said it received as of the deadline on Nov. 30, 2023.   

Conditional Continuation 

• According to Deventer, any crypto company that didn’t get an application in before the deadline “must stop immediately,” adding that “They are not allowed to [operate] anymore. They will be doing unregistered business.” 
• On the other hand, entities that applied may continue operating “under certain conditions” until the results are out.

“If I say that under certain conditions, I’m referring to the fact that certain of our codes of conduct will now be applicable to them in the interim as well,” he said, adding that “these codes of conduct [...] are all aimed at protection of the client and the public.” 

• The FSCA enforcement chief also said there were about 20 application withdrawals. The reasons for the withdrawals included a lack of requisite vital individuals and the cost of regulation.  
• A class of applicants also dropped off because crypto wasn’t their core business, and they weren’t ready to add crypto’s latest regulatory burden. 

A quick catch-up 

• In October 2022, the FSCA declared crypto assets as a financial product under the FAIS Act. 
• In July 2022, it became mandatory for digital assets exchanges to obtain licenses by the end of the year. 
• As of November 2023, the regulator received 128 license applications, with 19 withdrawn. 
• The FSCA planned to address 36 applications during its Dec. 12, 2022 meeting. 
• The remaining applications will be reviewed in two phases — 22 applications on Feb. 13, 2024, and the final 14 applications on Mar. 12, 2024. 

Zoom out 

• The regulatory clarity in South Africa has continued to lead to more mainstream developments in the crypto space. 
• Recently, Triple-A and Paycorp partnered to enable South African users of the CryptoExpress app to withdraw their cryptocurrencies as cash from over 3,000 ATMs in the country. 
• This partnership aims to provide a convenient way for crypto holders in South Africa to access and use their digital assets, bridging the gap between digital and traditional currencies. 
• Paycorp’s existing Cash Express ATMs have been integrated with the CryptoExpress app, allowing users to withdraw cash, support digital wallets, and engage in voucher transactions.