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Crypto Assets were declared a financial product in 2022, here is a recap of everything we told you


On 19 October 2022, the Financial Sector Conduct Authority (“FSCA") officially declared that crypto assets are now classified as financial products in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002 (“FAIS Act"). The Declaration was published in Government Notice 1350 in Government Gazette 47334.

This declaration was preceded by years of research into local and international developments within the crypto assets industry. However due to an exponential increase in the provision and use of crypto assets in South Africa, there had also been a rapid increase in cases of fraud, misrepresentation and mis-selling, which saw many people lose their hard-earned money.

Once the FSCA released the declaration, it embarked on a consumer financial education campaign to ensure that consumers were able to make informed decisions regarding investment in Crypto Assets.

Here's a breakdown of the messages that the FSCA wants all consumers to know about Crypto Assets.

What are Crypto Assets?

Crypto Assets are digital representations of value that are not issued by a central bank, and so are not currency, not legal tender and not guaranteed by the South African Reserve Bank. Some of the well-known crypto assets include Bitcoin (BTC) and Ethereum (ETH) as well as Litcoin, Namecoin, and PPCoin. Crypto assets have been used for payments, investments, and as a method to raise capital for projects.

The risks associated with Crypto Assets

  • Members of a virtual community may agree to accept crypto asset units as a representation of value, like how cash/money is accepted, but it is not currency nor legal tender, meaning that acceptance is not guaranteed.
  • Crypto asset prices are highly volatile and not a suitable investment if needing steady and reliable returns. Crypto assets can be difficult to sell, meaning that you may not have access to your savings as quickly as you need.
  • Marketing of crypto assets is often misleading and focuses on how much you can gain, without explaining how much you can lose. Make sure providers explain the risks fully and completely, and disclose fees, Ts&Cs and any conflicts of interest. Know all the facts before you invest.
  • Crypto crime is large and increasing. Global crypto asset theft increased by 500% in 2021, scammers worldwide stole an estimated $14 billion (R252 billion). Even the largest and most trusted exchanges have been hacked.

Dealing only with authorised Financial Service Providers

From 19 October 2022, providers of financial services related to crypto assets were required by law to act with honesty, integrity, due skill, care and diligence in the interests of clients. These providers must also apply for a license with the FSCA from 1 June 2023.

However, consumers don't have to wait until 30 November 2023 to lodge complaints. Should consumers believe that they have been financially prejudiced because of the financial service rendered to you in respect of crypto assets, they need to first approach the FAIS Ombud.

What's next?

Over the next week (19 – 26 June 2023), the FSCA will release a series of informative content related to Crypto Assets regulation and how these developments affect the consumer. Click here to find out what to expect.


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