South Africa Advances in Crypto Regulation with Significant Licence Approvals and New Compliance Measures

In a significant development for South Africa's burgeoning cryptocurrency sector, the Financial Sector Conduct Authority (FSCA) has announced the approval of 248 crypto asset service provider (CASP) licences from a total of 420 applications received to date. This marks a robust increase from April's figures, where only 75 CASP licences had been approved amid 374 applications. The FSCA is actively engaging with remaining applicants, having already turned down nine and seen 106 withdrawals after preliminary regulatory discussions.

This progression comes as the FSCA sets strict compliance criteria under the Financial Advisory and Intermediary Services (FAIS) Act, pinpointing operational ability and competency as the main hurdles. Applicants are required to demonstrate well-structured business plans and the necessary expertise in crypto assets to meet the regulatory standards.

Moreover, the FSCA has provided an exemption extension for CASPs and their key individuals until 30 June 2025, concerning their compliance with the mandatory regulatory examination requirements. This extension aims to furnish sufficient preparation time, highlighting the authorities' commitment to a balanced approach in fostering innovation while ensuring market integrity.

Additional regulatory strides include the implementation of Directive 9 by the Financial Intelligence Centre (FIC) effective from November. This directive is particularly significant as it aligns with the Financial Action Task Force's (FATF) travel rule, necessitating crypto platforms to disclose comprehensive transaction details. These measures are primarily in place to curb money laundering, terrorism financing, and other illegal activities.

For transactions under R5,000, CASPs must record basic details such as full names and crypto wallet addresses. More stringent data requirements apply to transactions over R5,000, or those suspected of illicit activities, including additional verification of personal and business identity information.

The directive also addresses the risks associated with unhosted or private wallets, compelling CASPs to develop specific risk-based policies for these. This includes gathering extensive information when heightened risks are detected, ensuring a proactive approach toward security and regulatory compliance.

Overall, South Africa is making substantial progress in establishing a secure and regulated environment for cryptocurrencies, balancing innovation with stringent regulatory oversight to strengthen the sector's credibility and ensure its orderly growth.