South Africa’s financial regulator, the Financial Sector Conduct Authority (FSCA) is set to review the applications of 36 cryptocurrency companies seeking operational licenses in the country this month.
According to a report published by local media sources, the regulator will commence the review process this month after it received 138 license proposals from firms seeking to become crypto asset service providers (CASP).
The FSCA will use several guideline principles including market participation, consumer protection, and risk management to find eligible firms for the licenses.
According to the report, the body disclosed that it received 93 applications in October and 128 as of Nov 30 marking the final day of applications and opening up the record process.
Of the submitted applications, 19 were withdrawn as a result of a lack of experience and improper operational policies, procedures, and repeated factors.
South Africa to focus on investor safety
Per the report, the government will look at the range of services provided by the companies, particularly the number, quality, and if they offer tools that support the general market like payment and custodial rails. Experts say this would increase safe investment in the country as its digital asset users grow.
The companies will be assessed by their level of internal regulation as Know-your-customer (KYC) requirements will be taken into consideration alongside conflicts of interest, disclosures, etc.
Cyber risk management to protect users will be looked into with credit counterparty risk management and complaint handling to avoid issues of consumer dissatisfaction and weakened investor confidence in the market.
All this is required as the local market grows in light of the recently released study by the regulator. The study shows a growth in monthly transaction volumes marking the highest point in the country with the total figure at ZAR8 billion.
Other countries to emulate MiCA
The digital asset market has faced multiple incidents of scams in recent years leading to increased regulatory pressure on the markets which many have argued for and against across crypto spaces.
The major incident that drove this push was the fall of the Terra Network and the subsequent implosion of FTX occasioning billions of losses and swirling the regulatory hammer around stablecoin and virtual asset exchanges.
As African countries shape up their regulatory framework, experts including several blockchain associations have pointed to the European model; the Markets in Crypto Assets (MiCA) as the guiding framework in terms of stakeholder collaboration and cross-country partnerships to create the landmark rules.
The body will determine the application of 76 licenses as follows; 36 crypto firm assessments will be released at the Licensing Executive meeting on Dec 12 while 22 firm applications will be on Feb 13 2024 at the licensing meeting.
