[ad_1]
It’s been a long time coming, but it looks like the sheriff has finally made it to the Wild West that is the crypto market.
On Friday, the Financial Sector Conduct Authority (FSCA) published a ‘draft statement’ defining crypto assets as a financial product under the Financial Advisory and Intermediation Services Act (Fais).
This means that anyone providing advice or acting as an intermediary, such as a crypto exchange, would have to register as a financial service provider and comply with the requirements of the Fais Law.
This will include crypto asset exchanges and platforms, as well as brokers and advisers.
The FSCA statement proposes better disclosure to clients to highlight the “high risks of investing in crypto assets.” Those involved in crypto assets will need to adopt a more robust advisory system, including proper risk assessments, when giving advice for buying crypto assets such as bitcoin.
From now on, crypto exchanges and other crypto brokers will be licensed as financial service providers. This licensing process will also improve the quality of data for policy makers and regulators on the crypto environment, “and to consider whether further regulatory interventions are needed,” according to a statement from the FSCA.
“The draft declaration does not affect in any way the status of crypto assets in the context of other laws, such as exchange control regulations, the requirements of the Pension Funds Law and the Law of Collective Investment Schemes, etc. ., nor does it attempt to regulate, legitimize, or lend credibility to crypto assets.
“The draft statement is intended simply to be an intermediate step in mitigating certain immediate risks in the crypto-asset environment, pending the outcome of the broader developments that are currently taking place through the Working Group. Crypto Assets Regulation (CAR WG), which will inform future policy interventions to be implemented in a variety of regulators and laws. “
Virtually all crypto exchanges in SA, anticipating that such regulation was on the way, preemptively adopted Fais-type standards, including ‘Know Your Customer’ (KYC) processes before onboarding new customers.
Position Paper Progress
The Intergovernmental Fintech Working Group, which involves government, regulators, and industry players, published a position paper in May 2020 to develop a regulatory framework for crypto assets, focusing on areas such as:
- The implementation of a regime to combat money laundering and terrorist financing,
- A licensing and supervision regime from a business conduct perspective, and
- A regulatory regime for monitoring cross-border financial flows.
The latest FSCA statement on crypto assets gives partial effect to some of the recommendations contained in the May 2020 position paper.
“The FSCA recognizes the impact that the draft declaration will have on companies that currently provide financial services in relation to crypto assets and, more specifically, the fact that such companies would not be able to operate legally unless they have obtained an FSP license in terms of section 8 of the Fais Act ”, says the FSCA. For this reason, before the publication of the final declaration, several “transitional arrangements” will be implemented for companies that already operate in this space.
Commenting on the proposed regulations, Jon Ovadia, founder and CEO of crypto firm Ovex, says this will have a beneficial effect on the cryptocurrency sector.
Industry feedback
“We are not surprised by this, as we knew it would come. We are excited about that. A big hurdle for us is not being regulated by the FSCA, which has deterred many people from getting involved in this sector.
“I believe the regulations will help bring credibility to the cryptocurrency sector and help weed out those involved in crypto scams,” Ovadia said.
“At present, there is no sure way to know who is legitimate and who is operating a scam, and people are understandably confused by this, so we see this as a positive development.”
Farzam Ehsani, co-founder of cryptocurrency exchange VALR, comments as follows: “VALR will always welcome prudent and appropriate regulation, particularly as it relates to consumer protection. We have been working with South African regulators for many years to inform a regulatory framework that does exactly this. However, it is important to note that today’s draft declaration of crypto assets as a financial product under the Fais Act by the FSCA was not one of the 30 recommendations in the Position Paper on Crypto Assets that was released by the regulators in April this year. .
“Also, all Fais Law products have a central issuer and crypto assets like Bitcoin do not. Gold, for example, is not classified as a financial product under the Fais Law. We look forward to fully engaging with the FSCA during the comment period to ensure a fair, relevant and appropriate regulatory position for the benefit of all South Africans. ”
The public has until January 28, 2021 to comment on the draft regulations.
