FAIS CRYPTO CHANGES & LICENSING
On 19 October 2022 Crypto Assets were declared a financial product in terms of FAIS.
This is defined as:
a digital representation of value that –
(a) 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;
(b) applies cryptographic techniques; and
(c) uses distributed ledger technology.
One can argue this included crypto currencies, nodes as well as NFT art as well as you'll see below.
It is important to note that currently this practically does not mean much and this was likely done in an attempt to avoid possible greylisting of South Africa by the FATF. This is because one is exempt from licensing as an FSP or Financial Services Provider (section 7(1) of the FAIS Act) and can obtain a license between June 2023 and November 2023 in terms of FAIS Notice 90 of 2022. It is important to note that included in this notice is the mention of currencies, NFT's, miners and nodes specifically.
But the notice also states that one must in the meantime comply with Chapter 2 of the Determination of Fit and Proper requirements of FAIS, which is too long to repeat here verbatim but generally states:
A person must have honesty and integrity and the chapter also states in which instances one is deemed to no longer have that (i.e. convicted of fraud etc).
One must also in the meantime comply with section 2 of the General Code of Conduct which states:
A provider must at all times render financial services honestly, fairly, with due skill, care and diligence, and in the interests of clients and the integrity of the financial services industry.
Full compliance with the General Code kicks in on 1 December 2023, ostensibly after licensing has been concluded.
“It is important to note that included in this notice is the mention of currencies, NFT's, miners and nodes specifically.”
There is also a Draft Notice out for comment on exempting persons rendering a crypto financial service from:
Obtaining insurance in the form of FI and PI cover
From qualification requirements but only if certain other academic requirements are met (this is opaque and we will certainly comment thereon)
From Regulatory Examinations for 18 months
From CPD requirements given that a minimum of 6 hours be done
From experience requirements (only for supervised reps) - our main issue here is that experience requirements are not addressed for KI's and Reps under the notice. No one currently has "Registered Experience" so the FSCA will have to expand on this and we will certainly make comments to this effect.
Submissions on the draft Exemption must, using the submission template attached, be submitted in writing on or before 1 December 2022 to the FSCA, at FSCA.RFDStandards@fsca.co.za.
Please reach us on our Contact Us page for any assistance on licensing matters related to crypto. We are here to help you.
