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FINANCIAL REGULATIONS

FSCA opens the door for crypto assets in personal investment portfolios

FSCA opens the door for crypto assets in personal investment portfolios

As cryptocurrency regulations continue to move towards the mainstream globally, it is expected that more international and local investors will allocate a share of their investment portfolios to cryptocurrencies.

In a significant development for South Africa’s financial landscape, the Financial Sector Conduct Authority (FSCA) has started approving licences for crypto asset service providers.

In March, the regulatory authority revealed that it had received 355 licence applications, with 59 approved by mid-March, 34 applications withdrawn and another 262 “in progress”.

The move is in line with international steps to recognise cryptocurrencies as a legitimate asset class, with regulators in the US approving a spate of bitcoin ETFs this year, including one managed by BlackRock (the world’s largest asset manager), as well as the EU’s introduction of comprehensive legislation governing cryptocurrencies.

Sean Sanders, chief executive of Altify, says the FSCA’s approval has given the green light for institutional and retail acceptance and adoption of the asset class within the South African financial sector, and shows that South Africa is in step with global trends.

Jaltech (via its subsidiary Jaltech Digital Asset Holdings) also received a licence, which means it can now offer intermediary services for its cryptocurrency investments, opening the door for financial advisers and institutional and retail investors to allocate a portion of their portfolio to cryptocurrencies.

This is a pivotal moment in the integration of cryptocurrencies into the local, traditional financial framework.

Gaurav Nair, a co-founder of Jaltech and head of fund management, says the company is “thrilled to be at the forefront of regulatory innovation in South Africa’s financial sector.  

“The FSCA’s decision to grant Jaltech the CASP [crypto asset service provider] licence reflects a recognition of the firm’s robust commitment to abide by regulatory requirements, stringent compliance standards, and commitment to investor protection,” he says.

As cryptocurrency regulations continue to move towards the mainstream globally, it is expected that more international and local investors will allocate a share of their investment portfolios to cryptocurrencies.

Sanders says as the appetite for bitcoin, ethereum, solana and other cryptocurrencies grows, mainstream financial entities are increasingly keen to include these assets in their portfolios. This strategy aims to avoid the risk of falling behind and to tap into the highest-performing asset class of the past decade.

Altify is a Cape Town-based investing app specialising in crypto and lucrative alternative assets. Backed by the JSE-listed investment group Sabvest, Altify secured approval through its subsidiary, RVX Capital, to offer crypto assets amongst other financial products.

Altify’s digital investment offering of ETF-style crypto bundles, physical gold on the blockchain and 15+ standalone crypto assets, all now fall under the purview of South Africa’s financial regulator.

“This step ensures enhanced consumer protection and places the most industrialised African nation ahead of many other countries, including the USA and Nigeria, who are yet to introduce official crypto-related regulations. 

“Other countries such as Singapore, the UAE and Poland have taken advantage of the lack of clear crypto regulations over the last several years to attract world-leading crypto businesses. As a result, they’ve drawn well paid and highly skilled talent towards these markets,” Sanders points out.

Christo de Wit, Luno’s country manager for South Africa, says the “groundbreaking” development means that licensed banks and asset managers can introduce crypto assets to their very large customer bases, and financial advisors can advise their clients about responsible crypto asset investing.

“There are millions of crypto users in South Africa who need to be able to easily identify providers that meet regulatory requirements. Licensing will raise standards, set barriers to entry for fly-by-night operators and protect consumers. 

“Licensed service providers will need to ensure that their systems and processes meet regulatory standards,” he says. DM

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