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 the regulation of crypto assets was in the offing and might come into force within nine to 15 months, after regulators said they intended to do so in November 2020.
WHAT DO INVESTORS THINK?
In a statement by Pet Rock Investments, the company said this “change brings crypto assets into the scope of the regulators which will benefit customers by providing the same level of oversight for crypto assets as any other financial product offered by registered financial service providers”.
The investment firm said that South Africa had become one of the leading countries to embrace cryptocurrencies, unlocking immediate and potential benefits across the financial services industry.
According to a recent survey by Pet Rock Investments, advisers see crypto being a key part of future planning in the next 12 months, with 72% of advisers already planning to allocate crypto in client accounts.
“Financial advisers are looking for exposure to this asset class but are fundamentally concerned with its volatility and inherent technical risks, especially custody,” said Paul Casarin, CEO of Pet Rock Investments.
“Regulations will provide the level of trust the market needs – especially this year. However, advisers see other risks which are paramount to understand before allocating any crypto to an investment portfolio.”
Meanwhile, Marius Reitz, Luno GM, Africa said, “Luno is delighted to see the development of the regulatory framework in South Africa progressing, and we look forward to further progress in the near future.”
“Another key benefit is that it should allow financial advisors to formally advise their clients on crypto investments. Until now, financial advisors could not provide advice on unregulated investment opportunities,” Reitz further added.
BUSINESS REPORT/REUTERS