The Financial Sector Conduct Authority (FCSA) said it received about 93 licence applications from crypto asset financial services providers (FSPs) in October in a bid to legally trade in South Africa.
According to the regulator, these applications include new applications from entities applying for the first time. The regulator said it has also received variations of licence applications from existing entities that had licensed in the past but added additional products such as Kryptos as an example to their licence.
The licensing process began this year in June, and the deadline for application of licenses was November 30.
Speaking at the Crypto Assets Market Study Media Roundtable, FCSA head of licensing department, Diketso Mashigo, said existing entities that were already regulated by the FCSA account for 80% of the total population of applications for licences.
“We finished six applications in October. These are applications that we have fully completed, and we will be presenting to our exco for approval or decline,” he said.
He said while the FSCA received about 93 applications at the end of last month, some have withdrawn their applications for various reasons.
“Some decided to take their business out of the country and conduct their services elsewhere in other foreign jurisdictions. Others simply did not meet the full set of requirements.”
The FSCA also released some findings published in the Crypto Market Study aimed at assisting the FSCA to better understand crypto asset-related activities performed by crypto asset FSPs in South Africa.
“The regulation of crypto asset-related financial services is a new development, and the FSCA is still unpacking the specific risks inherent in the South African environment.
“To regulate effectively, the authority needs to develop a deeper understanding of these risks and market dynamics, to refine its approach to licensing and supervising crypto asset activities to appropriately mitigate investor protection risks and ensure better financial customer outcomes,” the FSCA said.
The study said Cape Town leads the way in head office location, with the largest percentage of crypto asset FSPs having established their head offices in the city. It is followed by Johannesburg (33%) and Pretoria (7%).
“The results bear testimony to the fact that Cape Town is considered the largest technology hub in Africa and has been dubbed the Silicon Valley of Africa, home to more than 450 tech start-ups. A small proportion of crypto asset FSPs operating in South Africa have their head offices in foreign countries,” it said.
The report said the strong local presence bodes well for regulatory and supervisory protection.
“For the 10% of entities that have an offshore head office, consideration will need to be given to the requirements relating to having a local branch. This is important because it, amongst other things, creates a physical presence that would allow the FSCA to have appropriate oversight over and ensure accountability of the institution conducting activities in South Africa,” it said.
The report said even in the absence of a requirement for a local branch, these entities must register.
It said the data showed that 38% of the crypto asset FSPs received revenue of less than R1 million, while 46% received revenue between R1m and R50m.
“About 10% of crypto asset FSPs derive their income from regulated and unregulated financial services,” it said.
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