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How to make sure your crypto asset service provider is legit

How to make sure your crypto asset service provider is legit
Illustrative image | Sources: The headquarters of the South African Reserve Bank in Pretoria, South Africa, on 23 June 2017. (Photo: Waldo Swiegers / Bloomberg via Getty Images) | South African currency. (Photo: Gallo Images / Foto24 / Brendan Croft) | Rawpixel

After a few crypto asset service providers issued notices in the past week claiming to be the first or only providers to be licensed, the Financial Sector Conduct Authority has confirmed that it has issued 75 licences.

The licensing process for crypto asset service providers (Casps) kicked off last year on 1 June and existing institutions that were rendering financial services relating to crypto assets had until 30 November to submit their licence applications — 374 licence applications have been received to date. You can find the full list of 75 approved Casps here.

What is a crypto asset?

Crypto assets are defined as a digital representation of value that:

  • 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;
  • applies cryptographic techniques; and
  • uses distributed ledger technology.

Note that the FSCA’s licensing powers are limited to the authorisation and supervision of Casps in that they render financial services related to crypto assets. This authorisation does not include the recognition of crypto assets as legal tender or “cryptocurrency”.

Luno, a financial services provider that offers a crypto investment app, says it has seen an increase of more than 43% in the number of first-time crypto buyers in South Africa on its platform in March this year. At the same time, Bitcoin posted a new all-time high and other cryptos rallied to multi-year highs.

Christo de Wit.(Photo: Supplied)

Luno country manager Christo de Wit says research indicates that investors are open to crypto investments if recommended by financial advisers. “Many advisers have seen a lack of regulation as a barrier to entry. With FSCA licensing, the asset class should attract the attention of more sophisticated investors that are offered professional and responsible advice.”

Speaking at an FSCA conference in March, Felicity Mabaso, divisional executive for licensing, said 34 licence applications had been withdrawn. Reasons included an inability to show compliance with the competency requirements, a lack of clear and comprehensive business plans, policies, processes and a general lack of operational readiness to conduct crypto-asset related services.

Calling all Banxso investors

Just four months after issuing a warning about the so-called Bitcoin trading platform, Immediate Matrix, the Financial Sector Conduct Authority has revealed it is now investigating Banxso.

Immediate Matrix is not authorised to provide financial products or render financial services, but has been using images of Elon Musk and Patrice Motsepe in its marketing material.

Banxso is authorised as a Category I financial services provider (with FSP number 37699), but is currently under investigation following several complaints regarding its conduct. No findings have been made at this stage and Banxso is cooperating fully.

However, all affected members of the public or investors who have any information about this matter, are encouraged to contact the FSCA by sending an email to [email protected], with the subject: Banxso Investor. Kindly include any relevant information that could help the FSCA with its investigation.

Where to verify financial service providers

You can check if a company or individual is authorised to provide a specific financial product, financial service or financial advice by contacting the FSCA as follows:

  • Phone: 0800 110 443
  • An online search: On the FSCA website, search authorised financial institutions by licence and product category by clicking on “regulated entities”. This shows you what type of financial services the company or individual is licensed to provide. You can also check if a company is an authorised FSP on the FSCA website. DM
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