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Crypto Assets – Draft declaration to define it as financial product

On Friday, the Financial Sector Conduct Authority (FSCA) published a draft declaration of crypto assets as financial products. “Globally there is rapid growing interest by retail investors to purchase crypto assets. South Africa has also experienced an exponential increase in the provision and use of crypto assets,” the FSCA acknowledged.

According to the FSCA, the draft Declaration is intended to give partial effect to some of the recommendations contained in the Crypto Assets Regulatory Working Group’s (CAR WG) Position Paper by declaring crypto assets as a financial product under the FAIS Act.

How will the Declaration impact brokers and advisers?

Any person furnishing advice or rendering intermediary services in relation to crypto assets must be authorised under the FAIS Act as a financial services provider and must comply with the requirements of the FAIS Act. This will include crypto asset exchanges and platforms, as well as brokers and advisors.
In acknowledging the inherent types of risk brought about by crypto assets, and the fact that there are some differences between crypto assets and other financial products, the FSCA is in the process of considering whether the requirements contained the General Code and F&P Requirements are, in all respects, appropriate in the context of crypto assets. To the extent that specific requirements are found to be inappropriate in the context of crypto assets, a general exemption from these requirements might be issued.
The FSCA is also considering to what extent it is necessary to develop a specific code of conduct in the context of crypto assets.
Further communication regarding the proposed framework for regulating crypto assets under the FAIS Act, whether this will entail a separate code of conduct or a combination of leveraging on existing legislation and issuing exemptions, will follow in due course.

The FSCA further noted that the draft Declaration is merely intended to be an interim step in mitigating certain immediate risks in the crypto assets environment pending the outcome of broader developments currently taking place through the CAR WG, which will inform future policy interventions to be implemented across a variety of regulators and laws.

Interested parties are invited to submit comments on the draft Declaration on or before 28 January 2021 to the FSCA at FSCA.RFDStandards@fsca.co.za, using the submission template.

Click here to download the statement in support of the draft declaration of crypto assets as a financial product under the Financial Advisory and Intermediary Services Act.

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