South Africa Starts Approving License Applications from Crypto Exchanges

South African government made a call for cryptocurrency firms to apply for a registration last year. On this account, the regulatory agency received a heap of applications before 30th November.

The call to register was issued by the Financial Sector Conduct Authority (FSCA). Thus far, the regulatory agency has issued 59 licenses to various exchanges.

A Reuters report on the matter indicates that the government is planning to distribute more licenses as per the current laws. FSCA officials have revealed that they received a total of 262 registration certificates from various crypto exchanges. However, at the time of the call to register, around 355 exchanges were operational in the region.

Felicity Mabaso, the divisional executive of FSCA told media that the regulator has already finalized 59 licenses on 12th March. As per FSCA directions, cryptocurrency firms were asked to apply for registration before the deadline of 30th November, 2023.

An article published in Bloomberg indicates that registered firms will operate as per the Financial Advisory and Intermediary Services Act (FAIS).

Crypto Exchange to Follow FAIS Act

The FAIS Act warrants customer protection and allows regulators to take enforcement actions. Under the same regulations, the Financial Surveillance Department of South African Reserve Bank (SARB) will supervise the regulated firms.

FSCA Commissioner Unathi Kamlana spoke with journalists at Bloomberg. She noted that the regulatory and supervisory process is going to make up for the gaps that the existing regulatory framework cannot fill.

She further noted that we have to build up upon the regulatory requirements moving forward as we make new discoveries along the way. South Africa has become the first African nation to issue licenses for cryptocurrency exchanges. The platform created a dedicated regulatory document for crypto firms in 2021. The same legal framework remained active during 2022.

Regulations prepared in 2021 were expected to be finalized in the same year. The SARB later added that cryptocurrencies are declared as financial assets rather than currencies.

Eventually, FSCA classified cryptocurrencies as a financial product. In July, the FSCA commissioner reported receiving 20 applications before the November deadline.

South Africa to Amend Stablecoin Regulations

The regulatory agency stated that cryptocurrency exchanges operating without a license after the deadline will be subjected to regulatory scrutiny. Some of these penalties can be issued in the form of fines or closure.

In December 2023, FSCA reported that it received 128 applications and 72 of these were under consideration between December and March 14th. In February, the South African National Treasury shared the aim of amending policies about stablecoins as crypto assets in the annual budget review.

On this account, the legislators highlighted the importance of structural reforms and improving the public financial management. The annual budget of South Africa also revealed plans of the Treasury Department to include stablecoin analysis as a way to improve livelihoods of marginalized groups. The budget review for 2024 further elaborated digital payments promotions.

As per the Cointelegraph, The National Treasury noted that for 2024 the Intergovernmental Fintech Working Group will issue additional information for including stablecoins as a particular type of crypto asset.

A paper published on the matter of stablecoin analysis in 2024 notes that analytical work will assist in deciphering various use cases of stablecoins.   

On this account, the Financial Intelligence Center Act may be amended to mandate that all crypto firms report any transactions above 49,999 rand or $2650. South African officials are also studying the impact of blockchain-based tokenization on the local financial sector. A commission on the job is set to publish their findings in a paper by December 2024.  

Digital Payments Pilot Projects

In the same manner, the South African government has started a three-year program in association with the Switzerland State Secretariat for Economic Affairs. This project is carrying out four digital payment pilots.

These projects include community digitalization, digitization blue-collar workforce, remittances, and cross-border trades. The aim of these projects is to support small and informal business with payment innovations.