Starting November 2023, crypto exchanges in South Africa will be required to register with the country’s financial regulator or face sanctions. This comes after the Financial Sector Conduct Authority (FSCA) declared that no exchange will be allowed to operate without a license.
According to FSCA Commissioner Unathi Kamlana, the agency has already received 20 applications since opening for licenses a few weeks ago, with more expected before the deadline of Nov. 30. Crypto exchanges that fail to get licensed before the deadline will be fined or in extreme cases closed down.
“There is potentially serious harm to financial customers when using crypto products, and therefore it makes sense for us to introduce the regulatory framework,” Kamlana said in Pretoria. “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.”
By this instruction, South Africa will be the first African country to require that crypto exchanges register with a financial regulator to continue operating. This is in spite of the fact that African countries such as Nigeria top the list in terms of crypto trading volume, suggesting that Africa is leading in crypto adoption, but not in regulation.
African leaders however have shown a general dislike for cryptocurrencies, with Nigeria issuing a ban on the industry recently. This has not succeeded in reducing interest in digital assets though. In fact, the trading volume coming from the country has increased since then.
Countries Taking a Stand for Regulation
There has been a recent increase in the number of countries taking steps to regulate the cryptocurrency industry. While the US is the most known for this because of its brutal enforcement approach, many other countries are working on regulating the industry to ensure that their citizens are safe while investing in digital assets.
Just yesterday, Singapore enacted a law that forbids centralized crypto exchanges from offering crypto staking services to retail investors. In addition, Singapore now requires that all crypto exchanges save their customers’ assets with a trust to ensure they are safe.
A similar law was passed in Thailand the same day, forbidding staking services. The new regulation also requires that all crypto exchanges must have a risk declaration clearly stating that crypto investing is risky and investors can potentially lose all their investments. They have also been banned from any form of advertisements that suggest customers should participate in any staking activities whatsoever.
One thing these countries have in common is that they are open to crypto innovation, but are also ensuring that their citizens don’t get affected by the risks in the industry. This approach is different from the US which seems to be actively driving away innovation.
African Countries May Take a Cue
The steps taken by South Africa are quite timely, considering the increasing demand for crypto assets. Being the most developed African economy, other African countries may take a cue from this legislation to also regulate the crypto industry in their domains.
Hopefully, they will not be going after the industry to kill it as is the case with the securities and exchange commission (SEC) in the US. To be fair though, regulation is required to not just protect investors, but also ensure that crypto has a direction to grow in.