South Africa aims to enforce a licensing regime for crypto firms operating within its borders. The move comes as Africa’s most developed economy, with one of the region’s highest numbers of crypto users, has also been experimenting with central bank digital currencies (CBDCs). Crypto companies are expected to apply for the license by November this year.

20 License Applications Received from Exchanges

South Africa’s financial regulator, the Financial Sector Conduct Authority (FSCA), has received approximately twenty license applications since opening the process a few weeks ago, FSCA Commissioner Unathi Kamlana said in a recent interview with Bloomberg. He added that the regulator plans to take “enforcement action” against crypto exchanges that fail to register.

Firms have until November 30th to apply for a license, after which the regulator plans to take enforcement action against those operating without one. “There is potentially serious harm to financial customers when using crypto products, and therefore it makes sense for us to introduce the regulatory framework,” Kamlana said

“Time will tell the effectiveness of our measures, and we will continue to work together with the industry to refine and make changes where and if necessary.”

South Africa, as the most developed economy on the continent, is the first to require digital asset exchanges to secure licenses. The move will impact major trading venues like Luno, owned by Barry Silbert’s Digital Currency Group, Pantera-backed VALR, and global platforms such as Binance.

The tightening of regulations in the cryptocurrency sector is a global trend, with regulators and policymakers worldwide introducing stricter rules in response to company collapses and scandals. The bankruptcy of Bahamas-based exchange FTX and various large-scale crypto scams in South Africa have heightened concerns and prompted regulatory action.

In Europe, lawmakers have approved the EU’s Markets in Cryptoassets (MiCA) law, marking the bloc’s first set of rules for the crypto industry. Likewise, Hong Kong has recently implemented new regulations to license exchanges.

South Africa Rolls Out Instant Payment Services and Experiments With CBDCs

In mid-March, South Africa announced the launch of PayShap. This real-time digital payments service is intended to offer safer, faster, and significantly more convenient payment options for South Africans. The service was built as a collaborative effort between Bankserv, a clearing house owned by South African commercial banks, and the South Africa Reserve Bank.

“The launch of PayShap is a major milestone for South Africa’s payments modernisation journey. Payshap aims to reduce consumers’ dependency on cash and move to a more digital payments future,” Mpho Sadiki, head of real-time payments at BankservAfrica, said at the time.

The country has also been experimenting with CBDCs and has already launched several trials. In April last year, South African Reserve Bank (SARB) completed the second phase of its wholesale central bank digital currency (wCBDC) trials, according to an official announcement.

Notably, South Africa has also been involved in Project Dunbar, a technical experiment led by the BIS Innovation Hub that successfully developed prototypes to prove the viability of the multi-CBDCs concept. The Reserve Bank of Australia, the Central Bank of Malaysia, and the Monetary Authority of Singapore were also involved.

Push for Regulation As Crypto Scams Proliferate

South Africa has been a hotbed for crypto scams in recent years, resulting in the loss of billions of dollars in investments. The Cajee brothers’ Africrypt, which vanished with 70,000 Bitcoin in 2021, is among the biggest crypto scams in the country’s history.

Furthermore, the fraudulent multilevel marketing scheme Mirror Trading International Proprietary (MTI) also operated in the country. MTI was an international multilevel marketing scheme tied to cryptocurrency and forex trading pool investments.

The FSCA has been actively working on crypto and fintech regulations, collaborating with an intergovernmental fintech working group that includes significant financial sector regulators and policymakers such as the National Treasury and the South African Reserve Bank.

Aside from licensing, the FSCA is also focusing on consumer protection measures. This includes financial education initiatives and public awareness campaigns to inform individuals about the risks associated with cryptocurrency investments.

This article originally appeared on The Tokenist

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