South Africa grants 63 new crypto licenses

The Financial Sector Conduct Authority (FSCA) of South Africa has significantly expanded its roster of licensed Crypto Asset Service Providers (CASPs), approving 63 new applications in the second quarter of 2024.

Driving the news

• As of June 30, 2024, the total number of licensed CASPs in South Africa was 138, up from 75 in April 2024, FSCA said in a July 2 press release.
• This announcement comes just days after the FSCA revealed 30 ongoing investigations into unauthorized crypto financial services.
• The FSCA has received a total of 383 CASP license applications since the process began on June 1, 2023.
• The regulator has declined five applications, while 80 applicants voluntarily withdrew following discussions with the FSCA about the appropriateness of their business models.
• The remaining applications are still under consideration by the regulator.
• On- and off-ramp crypto service Kotani Pay is one of the newest licensees. The FSCA has published a comprehensive list of all 138 licensed CASPs on its official website.

Key details

• FSCA said the main reasons for license application rejections include failure to meet operational ability requirements, such as providing clear business plans and operational frameworks.
• The regulator also cited an inability to demonstrate the required knowledge and practical experience in crypto assets.
• Institutions with declined or withdrawn applications can re-apply if they can demonstrate full compliance with licensing requirements.
• Unauthorized CASP-related activities will be subject to regulatory action, except for those who applied by November 30, 2023, and are awaiting application finalization.

Key quote

The FSCA states:

“Institutions that have voluntarily withdrawn their applications or that have had their applications declined by the FSCA are welcome to re-apply in the future, provided they can demonstrate full and proper compliance with the applicable licensing requirements. In the meantime, they may not undertake any CASP-related activities as defined under the FAIS Act.”

Why it matters

• This licensing push is part of South Africa’s broader effort to regulate the crypto sector and address concerns about money laundering and terrorist financing risks.
• The increase in licensed CASPs indicates growing legitimacy and oversight in the country’s crypto industry.
• It also demonstrates South Africa’s commitment to balancing innovation with regulatory compliance, particularly given its current status on the FATF’s grey list.

Of note

• The FSCA’s licensing powers are limited to authorizing and supervising CASPs only for financial services related to crypto assets as defined under the FAIS Act.
• This authorization does not recognize crypto assets as legal tender or “cryptocurrency,” FSCA wrote.
• The South African Reserve Bank does not currently recognize crypto assets as currency.
• Crypto assets are defined as digital representations of value that are not issued by a central bank but can be traded, transferred, or stored electronically, apply cryptographic techniques, and use distributed ledger technology.