The Financial Sector Conduct Authority (FSCA), the regulator for the conduct of financial institution markets in South Africa, announced on Wednesday that cryptocurrencies are financial assets.

In a newspaper notice published on Wednesday, the Financial Sector Conduct Authority defined cryptocurrencies as “A digital representation of value” It is not issued by a central bank, but can be traded, transferred or stored electronically for the purpose of payment, investment and other forms of benefit.

The watchdog said the move was aimed at making it easier for local regulators to monitor the market and help protect users.

The change is effective immediately and is subject to the Financial Advisory and Intermediate Services Act of 2022.

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The declaration is the first legal step required to bring the crypto sector into the South African legal framework.

In July, the South African Reserve Bank (SARB) announced the central bank’s plans to adopt legislation aimed at classifying and regulating crypto assets as financial assets to balance innovation and investor safety.

During that time, Kobin Naidoo, Deputy Governor of the South African Reserve Bank (SARB):

The regulations are intended not to recognize cryptocurrencies as a means of payment, but as a financial instrument.

Under the proposed regulation, a person advising on crypto assets would be required to obtain a license as a financial services provider and to comply with the relevant requirements of both the FSCA and the Financial Intelligence Center (FIC) in the country.

This is intended to ensure proper monitoring, reporting and supervision by the FSCA and the FIC in general for cryptocurrency transactions.

In August, the South African Central Bank formally advised local commercial banks to work with crypto companies/crypto asset service providers (CASPs).

In the past, some local banks were unwilling to offer banking services to digital asset providers.

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In an effort to avoid financial crimes and illegal activities associated with crypto-asset transactions, the central bank also announced plans to develop a regulatory framework for cryptocurrency exchanges and platforms to allow for the inclusion of cryptocurrencies.

The plan will also include compliance with Know Your Customer (KYC) protocols and tax and exchange control requirements.

The regulations proposed by South Africa appear to be in line with proposals being developed by other central banks and regulators in the international market.

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