Crypto Companies in South Africa Now Required to Apply for Licenses by Financial Watchdog

In order to continue operating, crypto firms will be required to demonstrate compliance with the regulatory norms and standards for financial service providers in South Africa.

Cryptocurrency companies that wish to operate in South Africa will be required to apply for a license from the country’s Financial Sector Conduct Authority (FSCA) within a six-month period, starting from June 1 2023.

Although the new licensing regime for cryptocurrency companies in South Africa has been welcomed by local industry players, there are concerns about the potential consequences for those who fail to register within the designated timeframe.

 

“This is an extremely positive step for both the crypto industry and South Africans,” said Nick Taylor, Head of Public Policy at Luno for Europe, Middle East, and Africa.

“The licensing requirements that will flow from the FSCA’s classification will drive up standards, protect consumers, and give businesses the certainty to invest, innovate and create jobs,” Taylor added.

 

In November 2020, the Financial Sector Conduct Authority (FSCA) of South Africa put forth a proposal to classify cryptocurrencies as financial products and require companies offering crypto-related services to obtain a license. After conducting consultations on the proposed legislation, the FSCA published the final declaration on October 19, 2022, outlining the requirement for licensing in the crypto industry.

During the designated 6-month period for registration, firms that apply for licensing will be permitted to continue their operations while regulators review and make a decision on their applications for approval.

In order to continue operating, crypto firms will be required to demonstrate compliance with the regulatory norms and standards for financial service providers in South Africa. This includes adhering to conditions such as:
  • Operating with integrity
  • Maintaining diligence in their operations, and
  • Promptly providing the Financial Sector Conduct Authority (FSCA) with any requested information
Based on the typical application fees that companies pay to the regulator, the range can vary depending on the category under which the firms fall. These fees usually span from 2,544 ZAR South African Rand ($132) to 46,251 ZAR ($2,395).
Crypto companies will likely fall under Category One, which has the lowest fee, and is for firms that don’t fit into any of the other categories. But if applicants fall under multiple categories, they may have to do several applications.
According to the declaration, providers of crypto derivatives services do not qualify for the exemption that allows companies to continue operating while their licensing applications are being processed.

 

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