Cryptocurrency exchanges operating in South Africa have until November 30 to register with the country’s financial regulator. Those who will not comply with the directive risk facing enforcement actions, including fines or business closure, the Financial Sector Conduct Authority (FSCA) said today (Tuesday).
"There is potentially serious harm to financial customers when using crypto products, and therefore it makes sense for us to introduce the regulatory framework," commented Unathi Kamlana, FSCA Commissioner. "Time will tell the effectiveness of our measures, and we will continue to work together with the industry to refine and make changes where and if necessary."
South Africa Regulates Crypto
The exchanges that could be affected by the new directive in Africa’s most developed economy include Binance, Coinbase, Kraken, and KuCoin, which are currently operating in the region. FSCA is planning to curb an increase in fraudulent activities involving digital assets.
The South African financial regulator could have been prompted to implement the stringent regulation following previously reported cases of fraud in the sector. For instance, last year, a cryptocurrency exchange dubbed Africrypt claimed it had been hacked, and bitcoins worth $3.6 billion were missing.
The South African law enforcement agencies later launched an investigation into the matter in what was believed to have been a case of fraud, according to a report by Bloomberg.
In a separate instance, the FCSA said in 2020 that it was investigating Mirror Trading International (MTI), a cryptocurrency trading network that operated in South Africa. This was after the US Commodities and Futures Trading Commission (CFTC) sued the platform and its founder in what it termed as ‘the largest fraudulent scheme involving bitcoin’.
Curbing Crypto Risks
Due to such cases, the FSCA said it was working with the other financial sector regulators and the policymakers in the country to regulate cryptocurrencies. According to the watchdog, the sector poses significant risks to investors.
Similar moves have been taken by the regulators in other regions, including in the UK, where a bill that classifies the trading of cryptocurrencies as a regulated activity was recently approved by King Charles III, FinanceMagnates reported.
The legislation, which also brought stablecoins under the scope of payment rules, gave more powers to the regulators to supervise digital assets. Following its adoption, the Bank of England, the Payments Systems Regulator, and the FCA are expected to introduce new rules governing digital assets.
This article was written by Jared Kirui at www.financemagnates.com.
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