South Africa Classifies Crypto Assets as Financial Products, Clears Deck for Regulation

South Africa's financial watchdog has classified cryptocurrency assets as financial products, a notice in the government gazette said on Wednesday, enabling them to be regulated.

In the brief notice, the Financial Sector Conduct Authority (FSCA) said a crypto asset, which it referred to as "a digital representation of value", must be regulated in South Africa from the date of publication.

Regulations that the authorities have said they planned to introduce include applying foreign exchange controls and licensing crypto trading companies.

Financial watchdogs across the globe have been grappling with how to regulate new digital currencies and tokens, the prices of which have fallen since November last year.

Crypto assets are not issued by a central bank, but are capable of being traded, transferred or stored electronically.

South African Reserve Bank (SARB) Deputy Governor Kuben Naidoo told Reuters in May that regulation of crypto assets was in the offing and might come into force within 9 to 15 months, after regulators said they intended to do so in November 2020.

He added the SARB wanted regulation of crypto assets to prevent theft, money laundering and undermining of monetary policy because a ubiquitous cryptocurrency could weaken the authority of the central bank.

"This was the first legal step that was required to bring the crypto asset industry within the South African legal framework," Brent Petersen from Easy Crypto, a crypto buying and selling platform, said in a note.

He added the declaration would apply to crypto trading platforms, as well as those that provide advice or intermediary services for the buyers and sellers of digital financial assets.

© Thomson Reuters 2022