On 19 October 2022, the Financial Sector Conduct Authority (“FSCA”) officially declared that crypto assets are now classified as a financial product in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002 (“FAIS”) (“Declaration”). The Declaration was published in Government Notice 1350 in Government Gazette 47334.
The Declaration has defined crypto assets as a digital representation of value that –
- 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;
- applies cryptographic techniques; and
- uses distributed ledger technology.
As a result, financial services providers concerned with crypto assets will now fall within the regulatory jurisdiction of the FSCA. This Declaration has further implications because entities regulated by FAIS often have to comply with other financial sector laws which are enforced by the FSCA, which may now apply to any person furnishing advice or rendering intermediary services in respect of crypto assets.
Further, the FSCA has also published a Policy Document supporting the Declaration with the purpose of providing:
- background to and contextualise the Declaration;
- an overview of the consultation process that was followed when making the Declaration;
- clarity on the effect of the Declaration, including transitional provisions, and the approach the FSCA is taking in establishing a regulatory and licensing framework under the FAIS Act that would be applicable to Financial Services Providers (FSP) that render financial services in relation to crypto assets.
