South African financial regulator receives 128 crypto license applications

The South African Financial Sector Conduct Authority (FSCA) is evaluating applications from cryptocurrency companies seeking operational licenses.

As of Nov. 30, the financial regulator received 128 applications from crypto asset service providers (CASPs), marking the submission deadline. 

By the numbers  

• According to the regulator, the number of applications received in November surpassed the previous month’s total of 93 applications. 
• 19 of 128 applications were withdrawn due to lack of experience and inadequate operational frameworks.  
• The FSCA plans to address only 36 applications received during its next meeting on Dec. 12.  
• The regulator will review the remaining applications in two phases. A batch of 22 applications will be evaluated on Feb. 13, followed by the final 14 applications on Mar. 12. 

The FSCA evaluation process  

• The FSCA said it considers various criteria when analyzing each application, including the criticality of market services, provision of multiple services, and offering market support services. 
• The FSCA evaluates applicants’ operational policies and procedures, such as know-your-customer onboarding, data protection, and cyber risk management. 
• The regulator emphasized that its evaluation process adheres to market participation, consumer protection, and risk management principles. 

FSCA’s crypto market asset study  

• A market study on 47 CASPs provided critical insights into the South African crypto ecosystem. 
• The study found that 38% of the surveyed CASPs generate annual revenues under a million rand. Nearly half, 46%, falls within the 1 to 50 million rands. A smaller segment, 5%, reports annual revenues ranging between R151 million and R200 million. 
• The study also found that 60% of the total traded cryptocurrency volume in South Africa comprises “unbacked crypto assets.”
• This category excludes stablecoins, accounting for 26% of the market share, nonfungible tokens (NFTs) representing 4% of the market share, and certain types of centrally issued coins. 
• The South African cryptocurrency market reached an all-time monthly transaction value of over R8 billion (approximately $427 million) in November 2022. 

Why it matters  

• South Africa is the first country to require crypto exchanges to be licensed. In October 2022, FSCA declared Crypto Assets as a financial product under the Financial Advisory and Intermediary Services (FAIS) Act.  
• Also, In July, the FSCA made it mandatory for digital asset exchanges to obtain licenses by the end of this year.  
• The FSCA considers crypto asset activities to pose significant risks to financial customers. Although a legal framework exists, regulating these activities is still a new development.