South African regulatory body, the Financial Sector Conduct Authority, has announced a new draft law to check crypto activities across the country. The creation of this new framework sets the regulatory body on having crypto and investment activities under its watchful eyes.
In a statement released by the body on November 20, all firms currently trading or wish to trade in digital assets should endeavor to register under the body. According to the regulatory body, this move was concluded to know the number of crypto trading and investment platforms in the country and keep a tab on their activities.
The new proposal was established under the service act of 2002
The new proposal has been said to have the legal backing of the Financial and Intermediary Services Act, which was created in 2002. According to the established policy, digital assets can be classified as financial products. This classification means that all firms that deal in services like crypto investment, trading, advisory should be operating under the act and therefore should be governed by the FSCA. Authorities have seen this recent move as a sharp turn from the country’s soft regulatory approach towards digital assets.
With the new rule in place, the crypto sector will no longer be unclassified and unregulated but will now be classified as an integral part of the financial services sector. Regulators have also noted that all firms that offer this service must follow the rules that traditional financial houses follow. Another thing that was mentioned was that crypto is not still regarded as a currency in the country despite coming under the watchful eyes of the FSCA. In their review, the FSCA noted that the new draft framework was drawn up to combat the rising spate of crypto-related scams that is tearing across the country.
South Africa wants to check the rise of crypto scams with new regulations
One thing that authorities mentioned is the rising rate of crypto scams across South Africa. According to regulators, the crypto scam has been more rampant and popular in the African country in the last three years. According to the words of the director of the FSCA in an interview with Business Insider, he noted that he feels the sector should never be trusted, and no one should be allowed to hold digital assets or anything related to crypto.
“This new regulation does not automatically mean that trading crypto is accepted across the country; we want to use the framework to regulate the space and the businesses offering its services. With these new regulations, we should limit the number of crypto platforms that absconds with customer funds after promising them massive returns for their investments,” he said.
The FSCA’s new law will automatically mean that crypto firms will undergo evaluation, verification, registration, and get a license if they scale through to operate in the country. The FSCA also said it would test for qualifications, capacity, experience, knowledge, and the character of the parties involved in creating the investment.