South Africa Issues 63 New Cryptocurrency Licenses
In the second quarter of 2024, South Africa's Financial Sector Conduct Authority (FSCA) has granted licenses to 63 new Crypto Asset Service Providers (CASPs), marking a significant step forward in the country's growing crypto industry.
The surge in licensed CASPs reflects South Africa's commitment to regulating the crypto sector and addressing concerns about money laundering and terrorist financing risks. The FSCA, through its rigorous licensing process, ensures that only compliant CASPs operate, fostering consumer trust and reducing fraudulent practices.
The increase in licensed CASPs is a testament to the growing legitimacy and oversight in South Africa's crypto industry. However, the FSCA has declined five applications and 80 applicants have voluntarily withdrawn following discussions about the appropriateness of their business models.
To become a licensed CASP, institutions must demonstrate full compliance with licensing requirements, including stringent Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) controls. Failure to meet these requirements is the primary reason for license application rejections, which also include failure to meet operational ability requirements and an inability to demonstrate the required knowledge and practical experience in crypto assets.
By designating CASPs as accountable institutions subject to AML/CFT rules since December 2022 and implementing a cross-border crypto regulatory framework (to be finalized in 2025), South African authorities aim to curb illicit financial flows. These measures impose reporting requirements and strict administrative duties on CASPs handling cross-border transactions, closing loopholes that previously allowed crypto-related money laundering and terrorist financing.
The licensing of CASPs also promotes market integrity by aligning crypto asset activities with existing financial laws, improving transparency and market conduct. As of June 30, 2024, the total number of licensed CASPs in South Africa stands at 138.
It is important to note that the South African Reserve Bank does not currently recognize crypto assets as currency. The FSCA's licensing powers are limited to authorizing and supervising CASPs only for financial services related to crypto assets as defined under the Financial Advisory and Intermediary Services (FAIS) Act.
The regulator is actively investigating 30 ongoing investigations into unauthorized crypto financial services. Unauthorized CASP-related activities will be subject to regulatory action, except for those who applied by November 30, 2023, and are awaiting application finalization.
The FSCA has published a comprehensive list of all 138 licensed CASPs on its official website, providing transparency and fostering consumer trust in the crypto market. One of the newest licensees is Kotani Pay, an on- and off-ramp crypto service.
South Africa's commitment to balancing innovation with regulatory compliance is highlighted by the increase in licensed CASPs, given its current status on the FATF’s grey list. Crypto assets are digital representations of value that are not issued by a central bank but can be traded, transferred, or stored electronically, apply cryptographic techniques, and use distributed ledger technology.
In summary, the FSCA's push to regulate the crypto sector is a crucial step towards ensuring a secure and transparent crypto market in South Africa. The strict licensing regime and new cross-border crypto frameworks are critical to balancing crypto innovation with effective risk management against money laundering and terrorist financing in South Africa's expanding crypto market.
- The increase in licensed Crypto Asset Service Providers (CASPs) in South Africa signifies a significant step forward in its growing crypto industry, driven by the country's commitment to regulating the sector.
- By implementing stringent Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) controls, South African authorities aim to curb illicit financial flows in the crypto industry.
- The licensing process for CASPs ensures compliant operations, fostering consumer trust and reducing fraudulent practices, as observed in South Africa.
- South Africa's crypto industry is witnessing innovation, with the recent addition of Kotani Pay, an on- and off-ramp crypto service, to the list of 138 licensed CASPs.
- The FSCA's rigorous licensing process and cross-border crypto regulatory framework are critical for balancing crypto innovation with effective risk management against money laundering and terrorist financing in South Africa's expanding crypto market.
