The Financial Sector Conduct Authority (FSCA) of South Africa has significantly increased its oversight of the cryptocurrency sector, approving 248 crypto asset service provider (CASP) licenses out of 420 applications submitted. This marks a substantial jump from the 75 licenses granted earlier this April.
However, not all applicants met the FSCA’s rigorous standards. Nine applications were rejected, while 106 were voluntarily withdrawn after consultations with the regulator. Another 56 applications remain under review.
The FSCA cited failures to meet the “fit and proper” requirements outlined in the Financial Advisory and Intermediary Services (FAIS) Act as a key reason for rejections. Many companies lacked robust business plans or sufficient expertise in crypto assets. Despite these challenges, companies whose applications were denied can reapply once they fulfill the necessary criteria.
Companies awaiting decisions after submitting their applications by the November 30, 2023 deadline can continue operations temporarily. However, those operating without a license may face strict regulatory action.
New Compliance Deadlines and the “Travel Rule”
In addition to licensing requirements, the FSCA has extended the compliance deadline for regulatory exams from November 2024 to June 2025. Companies failing to meet this deadline risk suspension or withdrawal of their licences.
The Financial Intelligence Centre (FIC) also introduces stricter measures to enhance transparency. Set to take effect in April 2025, the “travel rule” will require CASPs to record the identities of all parties involved in crypto transactions. For transactions exceeding R5,000, detailed information such as ID numbers and wallet addresses must also be documented. These measures aim to combat money laundering and terrorism financing, aligning South Africa with international financial standards.
Balancing Opportunity and Accountability
South Africa’s efforts to regulate the crypto industry reflect a broader push for financial stability and transparency. Introducing these rules could enhance investor confidence and help the country address concerns raised by the Financial Action Task Force (FATF), which placed South Africa on its greylist.
While these regulations create opportunities for compliant providers to thrive, they also pose challenges for businesses unprepared to meet the heightened requirements. For CASPs operating in South Africa, staying ahead of regulatory demands has never been more critical.
