South Africa’s financial regulator to require licenses for crypto exchanges by year-end

The Financial Sector Conduct Authority (FSCA) of South Africa has made an announcement, stating that all cryptocurrency exchanges operating within the country must obtain licenses by the end of the year.

Already around 20 license applications have already been submitted since the commencement of the licensing process a few weeks ago.

It’s all about regulation

Kamlana, a representative of the Financial Sector Conduct Authority (FSCA) in South Africa, has issued a warning stating that crypto exchanges operating without licenses after the deadline will face enforcement actions, potentially resulting in closure or imposition of fines. 

FSCA Commissioner Unathi Kamlana revealed in an interview that more applications are anticipated before the November 30 deadline. Kamlana emphasized that the regulator is prepared to take “enforcement action,” which may involve shutting down or imposing fines on firms that continue to operate without a license after the deadline.

In a statement delivered in Pretoria, Kamlana highlighted the potential risks posed to financial customers in their utilization of cryptocurrency products. He explained that introducing a regulatory framework is a logical step to mitigate these risks.

The FSCA aims to monitor the effectiveness of its measures and remains committed to collaborating with the industry to refine and implement any necessary changes.

South Africa, the most advanced economy in Africa, has become the first country on the continent to mandate licenses for digital asset exchanges. Notably, prominent trading venues, including Luno, owned by Barry Silbert’s Digital Currency Group, and Pantera-backed VALR, have emerged from South Africa.

South Africa as an overseas refuge

The FSCA’s move to introduce a regulatory framework for crypto products is driven by concerns over potential harm to financial customers.

The FSCA has been collaborating with intergovernmental fintech working groups and key regulators to develop regulations for the crypto and fintech sectors, involving major institutions such as the National Treasury and the South African Reserve Bank.

This announcement comes at the same time as actions taken by U.S. regulators, specifically the Securities and Exchange Commission’s actions against cryptocurrency firms, have contributed to a prevailing narrative of innovation-seeking refuge overseas.

Following the collapse of FTX, Brian Armstrong, the CEO of Coinbase, attributed the lack of clarity in regulations as the driving force behind trading activity moving away from U.S. jurisdiction. With the clear direction set by South Africa, some suggest that this poses the potential for another overseas refuge.