South Africa's Financial Sector Conduct Authority (FSCA) has officially classified cryptocurrencies as financial products under the Financial Advisory and Intermediary Services Act. The FSCA defines crypto assets as digital representations of value that utilize distributed ledger technology (DLT). In a notice signed by FSCA Commissioner Unathi Kamlana, cryptocurrencies were declared financial products, with the regulatory framework taking immediate effect. The oversight plan includes implementing foreign exchange controls and issuing licenses to cryptocurrency trading firms.
Over the past few years, South African authorities have consistently expressed interest in regulating the crypto sector. Approximately three years ago, the Intergovernmental Fintech Working Group (IFWG)—comprising the central bank, the National Treasury, and financial regulators—published a position paper calling for a clear regulatory framework for cryptocurrencies.
South Africa’s Regulatory Journey
Earlier this year, South African Reserve Bank (SARB) Deputy Governor Kuben Naidoo stated that the country would seek to introduce a regulatory framework for cryptocurrencies. There have also been reports that South Africa is considering the creation of a digital rand—a central bank digital currency (CBDC) issued by the reserve bank and pegged to the South African rand.
During the PSG Konsult Think Big webinar in October 2022, Naidoo remarked:
“Our view has changed, and we now regard crypto assets as financial assets, and we want to regulate them as financial assets.”
The FSCA believes that recognizing cryptocurrencies as financial products is a crucial first step in consumer protection. The authority noted that the crypto industry has been actively marketing its products and services without any oversight regarding their quality. According to the Chainalysis 2022 Global Crypto Adoption Index, South Africa ranks 30th worldwide in cryptocurrency adoption. Estimates suggest that between 10% and 13% of South Africans own or trade cryptocurrencies.
The UK’s Post-Brexit Strategy Includes Crypto Regulation
In the United Kingdom, proposed amendments to the new Financial Services and Markets Bill have been approved. The bill consists of 20 separate measures spanning over 335 pages, including provisions for cryptocurrency regulation introduced by Member of Parliament Andrew Griffith. The House of Commons held a hearing on Tuesday, October 25, and members of Parliament voted in favor of the bill.
The legislation grants the Financial Conduct Authority (FCA) the power to regulate crypto assets based on the principles of the Financial Services and Markets Act 2000. The bill already seeks to add payment rules for stablecoins and crypto-related businesses, requiring FCA registration processes and oversight of crypto advertising.
The bill’s passage comes just days after the appointment of a new crypto-friendly Prime Minister, Rishi Sunak, following Liz Truss’s resignation. The UK and global crypto community welcomed Sunak’s appointment. During his tenure as Chancellor of the Exchequer under Prime Minister Boris Johnson, Sunak expressed ambitions to make the UK a global hub for cryptocurrency.
Sunak’s appointment as Prime Minister, combined with the passage of the digital asset regulation bill, is seen as a sequence of events that will benefit cryptocurrency and its adoption both in the UK and worldwide.
Global Variations in Cryptocurrency Regulation
Cryptocurrencies continue to attract attention from investors and regulators worldwide. As a emerging asset class, digital assets have prompted regulators to explore various approaches to oversight. Governments have adopted divergent strategies: some have imposed strict rules on the ownership, transfer, and trading of digital assets, while others have established special committees to study the impact of digital assets on the broader financial and investment landscape. In many cases, governments that were previously harsh on crypto-related activities have relaxed some legislation and are now moving toward regulating the asset class through new laws.
In the United States, the Department of Justice and the Securities and Exchange Commission (SEC) have been collaborating on future cryptocurrency regulation to ensure consumer protection and streamlined oversight. The Biden administration has also introduced new rules under the Infrastructure Investment and Jobs Act, classifying cryptocurrency exchanges as brokers that must comply with anti-money laundering (AML) and countering the financing of terrorism (CFT) record-keeping obligations. Under the new law, crypto exchanges must report transactions directly to the Internal Revenue Service (IRS), enabling the IRS to tax crypto traders appropriately.
In crypto-friendly jurisdictions like Singapore, rules around cryptocurrency trading have been relatively relaxed. Although cryptocurrencies are not considered legal tender in Singapore, crypto exchanges and trading are legal. The Singaporean government has not endorsed or issued any retail-focused cryptocurrencies but has collaborated with blockchain companies to explore the use of DLT for the clearing and settlement of payments and securities. However, some of these crypto-friendly nations are now tightening their previously宽松 regulations and moving toward formal oversight.
Meanwhile, in countries like China, Algeria, Bolivia, and other regions less friendly toward cryptocurrency, strict restrictions on ownership remain in place. These governments have cited concerns such as money laundering and terrorist financing through the use of cryptocurrencies, or simply a aversion to currencies not issued and regulated by their central banks.
El Salvador made history in 2021 by becoming the first country to adopt Bitcoin as legal tender. At the time, international monetary institutions, including the International Monetary Fund, urged El Salvador to reverse its Bitcoin policy. In April 2022, the Central African Republic became the second nation to adopt Bitcoin as an official currency.
Despite the current disparities in how governments treat cryptocurrencies, regulatory structures are gradually being built. As more countries take steps to regulate digital assets and their brokerage, the regulatory gap may narrow, leading to globally supported legal frameworks for the ownership, transfer, and trading of cryptocurrencies.
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Frequently Asked Questions
What does it mean for cryptocurrency to be classified as a financial product?
Classifying cryptocurrency as a financial product means it falls under existing financial regulatory frameworks. This provides consumer protections, ensures transparency, and requires businesses operating in the sector to comply with licensing and reporting obligations.
How will South Africa’s new regulation affect crypto traders?
Crypto traders in South Africa will benefit from increased consumer protections and clearer guidelines. Trading firms must now obtain licenses, and foreign exchange controls will be implemented, adding layers of security and legitimacy to the market.
What is the UK’s approach to crypto regulation post-Brexit?
The UK is positioning itself as a global crypto hub through comprehensive legislation. The Financial Services and Markets Bill grants the FCA authority to regulate crypto assets, including stablecoins and advertising, creating a structured yet innovative environment for crypto businesses.
Which countries are the most crypto-friendly?
Nations like Singapore, Switzerland, and now the UK are known for their progressive stance on cryptocurrency. These countries have established clear regulations that encourage innovation while ensuring market integrity and investor protection.
Why do some governments resist cryptocurrency adoption?
Some governments resist crypto due to concerns about financial stability, potential use in illegal activities, and the challenge cryptocurrencies pose to traditional monetary systems controlled by central banks.
Are cryptocurrencies legal tender in many countries?
As of now, only a few countries, such as El Salvador and the Central African Republic, have adopted cryptocurrencies as legal tender. Most nations treat them as assets or property rather than official currency.