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The South African Financial Conduct Authority (FSCA) has introduced a new licensing regime that requires crypto companies to obtain a license to operate in the country within six months starting June 1.
The agency said the requirement is not only to strengthen consumer protection, but also to raise industry standards, giving companies the confidence to innovate and create new jobs. Financial services related to crypto assets will be regulated under the Financial Institutions Act (COFI) to protect consumer interests. The FSCA noted that non-fungible token (NFT) issuers, miners and node operators are currently exempt from obtaining licenses, but this issue will definitely be considered in the future.
Nick Taylor, head of policy for crypto exchange Luno in Europe, the Middle East and Africa, called this an important positive moment for the industry and local cryptocurrency traders. However, not everyone is so optimistic.
Local crypto companies fear that the short period for obtaining licenses and possible fines for non-compliance could lead to the closure of small organizations working with digital assets. Failure to register by the deadline can result in a fine of 10 million South African rand (about $510,000) or imprisonment for up to 10 years. Therefore, potential market participants may even refuse to work in this jurisdiction. For example, Shadrack Kubyane, co-founder of the South African blockchain company Coronet, believes that such fines can “sink” the local crypto sector.
Many cryptocurrency companies are also unhappy that little time is given to prepare for compliance with regulations. Despite the fact that they asked the regulator to extend the application period to two years, the FSCA considered this period too long, settling on six months. Companies are afraid that they will not have time to prepare the necessary documentation in time. To obtain a license, they must provide comprehensive information about their commercial activities, shareholders and financial condition.
Recall that last fall, the FSCA amended the legislation, according to which crypto assets are equated to financial products. At the beginning of the year, the South African Advertising Standards Authority (ARB) introduced new rules for advertising cryptocurrencies to protect investors from misleading information.
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