Bitcoin and other crypto assets will be regarded as financial products in South Africa as the country attempts to regulate cryptocurrencies.
Regulation of the nascent cryptocurrency industry remains challenging to several countries due to its infancy and intricacies. Some nations, such as China, have resorted to restricting the use of cryptocurrencies, while others put in efforts to leverage the industry for economic growth through proper regulation.
South Africa is one step ahead in its journey towards regulating the cryptocurrency scene, as a recent declaration regards Bitcoin and other crypto assets as financial products. The Financial Sector Conduct Authority (FSCA) of South Africa recently published a notice in this regard.
The South African FSCA regulates the financial markets in South Africa. The General Notice published Wednesday informed the public of the FSCA’s declaration of crypto assets as financial products under the Financial Advisory and Intermediary Services Act of 2002.
This move from South Africa indicates that the country will start regulating all crypto assets, including Bitcoin (BTC) and Ethereum (ETH), as every other financial product, subjecting them to provisions of the Financial Advisory and Intermediary Services Act of 2002.
For clarification, the FSCA revealed three different criteria that would qualify an instrument as a crypto asset. The agency described crypto assets as:
“a digital representation of value that –
(a) is not issued by a central bank, but is capable of being traded, transferred or stored electronically by natural and legal persons for the purpose of payment, investment and other forms of utility;
(b) applies cryptographic techniques; and
(c) uses distributed ledger technology.”
According to the FSCA, the declaration’s provisions are to take effect on the date of the notice’s publication, October 19. The decision brings South Africa closer to achieving regulatory clarity on cryptocurrencies.
Whether this declaration will foster the growth of cryptocurrencies in the country or not remains to be seen. Notwithstanding, it should aid the authorities by providing a more concrete framework for proper consumer protection, as the country is in dire need of that, considering the surging adoption rate.
A Finder’s report on crypto ownership by country in September ranked South Africa 18th out of 26 surveyed countries on crypto adoption rate, with individuals aged 18 to 34 years representing 43% of South African cryptocurrency owners.
The report notes that the crypto ownership rate in the country sits at 10%. Nevertheless, in 2020 when cryptocurrencies saw one of the highest influx of users, the Global Web Index highlighted that an estimated 15% of South Africa’s population invested in BTC.