South African financial regulator mandates licensing for crypto exchanges

The South African Financial Sector Conduct Authority (FSCA) has said all cryptocurrency exchanges operating in South Africa must obtain a license by the end of the year. This is part of the Authority’s measures to protect financial consumers from the risks associated with cryptocurrencies — e.g., fraud, theft, and market manipulation. 

The details  

• FSCA Commissioner Unathi Kamlana said in an interview that the agency had received a few license applications since its recent opening and expects more before the November 30 deadline. 
• Kamlana warned that crypto exchanges that continue to operate without a license after the deadline will face enforcement actions, including fines or the closure of such firms. 
• He, however, acknowledged that it would take time to determine the effectiveness of the new measures and assured the industry that the regulator would continue to collaborate with them to refine and implement necessary changes. 
• In a typical regulator speak, Kamlana emphasized the potential risks associated with cryptocurrencies and recommended caution before investing in them. 

Key quote  

“There is potentially serious harm to financial customers when using crypto products, and therefore it makes sense for us to introduce the regulatory framework. Time will tell the effectiveness of our measures, and we will continue to work together with the industry to refine and make changes where and if necessary.” Kamlana said.  

Why it matters  

• South Africa is one of the few countries on the continent to offer a license to exchanges. This move is expected to increase regulation and oversight of the cryptocurrency industry. 
• Botswana is another country where a crypto license is available. In 2022, the crypto exchange Yellow Card became the first company to secure the license. 
• Regulations like this can protect consumers from falling prey to cryptocurrency scams, as the country has also experienced some high-profile cryptocurrency frauds causing investors losses.  

Key background  

• In October 2022, the FSCA declared crypto as a financial product in South Africa. It marked a new phase in regulating the crypto market, making it easier for authorities to monitor the industry and protect consumers.