Expect changes in the cryptocurrency industry in South Africa this December.
After years of considering multiple options to keep track of the booming industry, the country’s Financial Intelligence Centre Act (FICA) annexure has been amended to consider crypto asset service providers as “accountable institutions” from 19 December 2022.
Finance Minister Enoch Godongwana has amended the FICA annexure, listing cryptocurrencies under Schedule 1 of the Act. This comes after the Financial Sector Conduct Authority declared cryptocurrency a financial product in October of this year.
Cryptocurrency to play ball
The amendment will require accountable institutions to ‘FICA’ their customers by verifying their identity. Accountable institutions include dealers in foreign exchange currency, banks, and estate agents. They will be required by law to keep track of transactions, identify parties involved, and keep records of transactions, including highlighting what appears to be suspicious transactions. A cryptocurrency exchange, for FICA purposes, includes anyone buying and selling crypto for a client and anyone exchanging crypto -including individuals.
“Crypto asset means a digital representation of perceived value that can be traded or transferred electronically within a community of users of the Internet who consider it as a medium of exchange, unit of account or store of value and use it for payment or investment purposes,” notes the amendment.
An accountable institution will request copies of identity documents and proof of address for verification purposes. So much for anonymous transactions.
From 1 June 2023 until 30 November 2023, cryptocurrency service providers will be required to apply for a Financial Service Provider license.
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Now that crypto is finally included in the country’s FICA legislation, monitoring and prosecuting criminals in the scam-riddled industry should be easier, in theory.
The amendment comes after the Financial Action Task Force (FATF)’s warning to South Africa about the weakness in the country’s systems meant to combat money laundering and terrorism financing. FATF said the country was being slow in its efforts to regulate cryptocurrency – making it easier for cryptocurrency crimes to thrive. It warned South Africa of a possible greylisting, which would make it difficult to transact with other countries. This could dent the country’s GDP.