The Financial Sector Conduct Authority (FSCA) of South Africa has signaled an intensifying crackdown on non-compliant crypto asset service providers (CASPs), with the potential for additional license withdrawals looming by mid-2025. This development highlights the regulator’s drive to enforce stricter oversight in a rapidly evolving sector.
The FSCA commenced licensing CASPs under the Financial Advisory and Intermediary Services (FAIS) Act in June 2023, marking a significant regulatory milestone for South Africa’s burgeoning crypto industry. By December 2024, the FSCA had received 420 license applications, of which 248 were approved and nine declined. Additionally, 106 applications were voluntarily withdrawn after consultations revealed shortcomings in business and operational models, leaving 56 applications under review.
The FSCA identified two primary deficiencies in declined applications:
- Operational Ability Requirements: Many applicants failed to provide detailed business plans or adequately outline key operational frameworks for crypto-related activities.
- Competency Standards: A lack of requisite knowledge and practical experience in crypto assets was prevalent among unsuccessful applicants.
Applicants whose licenses were declined or voluntarily withdrawn retain the right to reapply, provided they can demonstrate compliance with the FAIS Act’s stringent “fit and proper” requirements. However, any CASP found operating without authorization faces regulatory sanctions, underscoring the FSCA’s zero-tolerance approach.
Extended Deadline for Regulatory Examinations
To accommodate existing CASPs, the FSCA has extended the compliance deadline for regulatory examination requirements under the FAIS Act to June 30, 2025. This extension provides licensed entities additional time to meet the Determination of Fit and Proper Requirements as outlined in Board Notice 194 of 2017.
Failure to pass these examinations could result in severe repercussions, including license suspension or withdrawal. The regulator’s insistence on high standards aims to bolster consumer protection and mitigate systemic risks associated with crypto asset activities.
Despite the FSCA’s licensing efforts, crypto assets remain unrecognized as legal tender by the South African Reserve Bank. Instead, they are categorized as digital representations of value that use cryptographic techniques and distributed ledger technology. The FSCA’s remit is limited to overseeing CASPs offering financial services related to crypto assets, such as advice, intermediary functions, and investment management.
This regulatory focus ensures that crypto market participants operate within a framework that prioritizes transparency and accountability, albeit without legitimizing cryptocurrencies as formal currency.
Looking Ahead
With the June 2025 deadline approaching, industry stakeholders face mounting pressure to align with regulatory requirements. The FSCA’s robust stance signals a broader trend of increased oversight within South Africa ’s financial ecosystem, reflecting global efforts to regulate the volatile crypto market.
Market observers and CASPs are keenly awaiting further updates, which will likely shape the trajectory of South Africa’s crypto sector in the coming years. Meanwhile, the FSCA continues to encourage public vigilance and transparency, offering resources such as an approved list of licensed CASPs on its website.