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South Africa is poised to become the first country on the African continent to implement a licensing requirement for digital asset exchanges.
According to a report by Bloomberg, the Financial Sector Conduct Authority (FSCA) of South Africa has announced that all cryptocurrency exchanges operating in the country will be required to obtain licenses by the end of 2023.
FSCA commissioner Unathi Kamlana revealed that approximately 20 license applications have been received since the recent opening of the licensing process, with more expected before the deadline of November 30. Kamlana emphasized that if crypto exchanges continue to operate without a license beyond the deadline, the regulator intends to take enforcement action, which could include imposing fines or shutting down noncompliant firms.
Kamlana further explained that introducing a regulatory framework for crypto products is a prudent approach to mitigate potential risks and protect financial customers from harm. He acknowledged the need for time to assess the effectiveness of these measures and assured ongoing collaboration with the industry to refine and implement necessary changes.
This development positions South Africa as a trailblazer on the continent, as countries worldwide continue to tighten their regulations on cryptocurrencies. The new licensing requirement will impact major South African trading venues such as Luno, owned by Digital Currency Group, and VALR, backed by Pantera Capital. Global platforms like Binance, operating within the country, will also be required to obtain licenses.
A spokesperson from the FSCA clarified that individuals providing financial services related to crypto assets, with certain exceptions like crypto miners and NFT service providers, must obtain authorization. Failure to comply with this requirement will be considered a violation of the law, potentially leading to regulatory action by the relevant authorities.
The FSCA has been actively engaged in shaping crypto and fintech regulations, collaborating with an inter-governmental fintech working group comprising major financial sector regulators and policymakers, including the National Treasury and the South African Reserve Bank.
This move aligns with the global trend of increasing regulatory scrutiny in the cryptocurrency sector. In a similar vein, on July 3, the Monetary Authority of Singapore announced that crypto service providers in the country would be required to place customer assets into a statutory trust for secure storage by the end of the year. These regulatory actions reflect a growing emphasis on stricter oversight and consumer protection within the crypto industry.
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