Under the Financial Advisory and Intermediary Services (FAIS) Act, the South African Reserve Bank (SARB) has publicly said that crypto assets are financial assets. This is a big step toward regulation. The choice was made after SARBs first warning about the volatile nature of the crypto asset market.
Analisa Ndebele, an associate at Webber Wentzel, and Lerato Lamola-Oguntoye, a consultant, have examined the consequences of this development.
The FAIS Act, which was not originally made for the digital world, will be used as a starting point for regulating crypto assets in South Africa, they say. But its important to remember that this is an ongoing learning process, and the Conduct of Financial Institutions Act is still being worked on to include more rules.
Under the FAIS Act, people who offer financial services must have a license called an FSP (financial services provider). This means that crypto asset service providers (CASPs) must now follow the same rules as other companies that offer banking services.
Lamola-Oguntoye and Ndebele add to what the FAIS Act says about crypto assets by saying that it includes digital representations of value that are not issued by a central bank but can be traded, transferred, or stored for use.
They stress how important it is that the meaning of crypto assets is meant to be broad and not based on any particular technology. In South Africa, crypto assets are not considered legal tender, so crypto assets is used instead of cryptocurrency.
The addition of crypto assets to the FAIS Act expands the definition of financial services to include activities related to these assets, the experts say. People who help others buy, sell, manage, administer, or service crypto assets will be seen as offering a financial service and need an FSP license.
Concerning the relationship between the FAIS Act and the Financial Intelligence Centre Act (FICA), they say, CASPs must carefully consider whether they meet the description of accountable institutions in Schedule 1 of FICA. Along with the standards of the FAIS Act, it is also essential to meet FICA obligations, such as registering with the Financial Intelligence Centre (FIC).
If you dont register as required by the FAIS Act and FICA, you could face fines and other regulatory actions, they say. People and businesses in the crypto industry must determine if they need to register under both acts and ensure they do so on time.
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