South Africa discloses plans for 30 probes into cryptocurrency operations
South Africa Cracks Down on Unlicensed Crypto-Financial Services
In a bid to address money laundering and terrorist financing risks, the Financial Sector Conduct Authority (FSCA) of South Africa has launched 30 investigations into unauthorized crypto-related financial services. This is part of South Africa's broader effort to address the Financial Action Task Force's (FATF) concerns, as the country is one of the 12 African countries currently on FATF's grey list.
The FSCA, which declared crypto assets as financial products in October 2022, has taken significant strides in regulating the crypto industry. The regulator's enforcement division has now established an investigation team to tackle cases involving entities offering crypto financial services without proper licensing, with Unathi Kamlana leading the investigation commission for such incidents.
The crackdown has already yielded results. In the first quarter of 2024, the FSCA issued the first set of licenses to compliant firms, marking a milestone in the regulation of crypto activities in South Africa. Recently, the regulator announced that it had granted 63 further licenses, bringing the total number of crypto licenses in South Africa to 138. Notable recipients of this authorization include crypto exchanges Luno and Valr.
The South African Reserve Bank (SARB) has also shown a cautious but progressive approach to cryptocurrency integration, authorizing financial institutions to serve crypto clients.
However, the FSCA is not resting on its laurels. The regulator has highlighted the growing sophistication of online scams, including deepfake technologies and impersonation of legitimate FSPs and regulators. The rise of financial influencers on social media platforms has also caught the FSCA's attention, with concerns about potential misinformation and scams.
To combat these threats, the FSCA emphasizes the importance of implementing robust risk management and compliance programs (RMCPs). The regulator's focus areas that could impact the broader cryptocurrency ecosystem include copy trading and signals, finfluencers, online harm, and anti-money laundering (AML) compliance.
In addition to its enforcement efforts, the FSCA plans to publicize the outcomes of its investigations and issue warnings about unregistered crypto businesses. This transparency aims to protect consumers and promote a healthy and sustainable crypto market in South Africa.
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