South Africa’s Financial Sector Conduct Authority (FSCA) recently made an important announcement regarding the regulation of crypto asset service providers (CASPs) in the country. The FSCA disclosed that it has approved the licences of 248 firms to operate as CASPs, while rejecting nine applications. There are still 56 applications pending a decision from the regulator.
Since the licensing process began on 1 June 2023, the FSCA has received a total of 420 CASP licence applications. Additionally, 106 applicants chose to withdraw their applications after discussions with the regulator. Reasons for the decline of certain applications include the failure to meet the appropriate fit and proper requirements under the FAIS Act.
The FSCA emphasized that many declined applicants lacked operational ability, such as a clear business plan and model, as well as key frameworks to support crypto asset activities. These applicants also lacked the necessary knowledge and experience in cryptocurrencies. However, the FSCA stated that companies whose applications were declined or withdrawn can reapply once they can demonstrate full compliance with the licensing requirements.
It is crucial for South Africa to properly regulate cryptocurrency companies, and the FSCA does not permit unlicensed firms to operate within its jurisdiction. Licensed companies must also pass regulatory examination requirements by 30 June 2025, or face potential regulatory action.
While cryptocurrencies are viewed as digital representations of assets for trading, investment, or payment in South Africa, the country’s central bank does not recognize them as legal tender. The FSCA’s licensing powers are limited to authorizing and supervising CASPs that provide financial services related to crypto assets under the FAIS Act.
Earlier this year, the FSCA revoked the licence of a local CFD provider, Banxso, due to concerns about its operational practices and client risks. The FSCA also clarified that all trading signals providers operating in the country must be licensed.
It is evident that the FSCA is committed to ensuring that crypto asset service providers in South Africa comply with regulatory requirements to protect investors and maintain the integrity of the financial sector.