• South Africa recently announced the first crypto asset service provider (CASP) licences under its Financial Advisory and Intermediary Services.

• Revix is among the CASPs that received their crypto licences under its incorporated name, RVX SA Capital (pty) Limited.

• We expect South Africa to be a hotbed of innovation and developments in the cryptocurrency space shortly.

South Africa recently announced the first crypto asset service provider (CASP) licences under its Financial Advisory and Intermediary Services (FAIS Act), a key piece of legislation that regulates financial services in the country.

Initial reports indicated that around 60 crypto licences would be issued, but the final number was 75. The announcement includes some exciting highlights, including the type of licences, notable names on the list, and some notable absences.

If the numbers and spread amongst the licences are indicative, the future of crypto in South Africa is bright.

SA CASP licence categories explained.

The 75 crypto licences issued fall into categories I, II, and IIA.

Category I

Category I CASP licences cover both advice and intermediary services. In simple terms, the category I licence enables holders to provide services such as exchanges, custody, and other intermediary services for financial assets. Of the 75 crypto licences issued, 71 were category I.

Category II

According to the FAIS Act, a category II financial service provider allows the holder to conduct investment management services. It’s important to note that a provider can hold more than one licence category under the framework.

So, a provider can be licensed under both categories under the same law. Of the 75 licenced entities, 33 were approved for category II. In cryptocurrency, this presumably allows additional investment services such as bundled products, Exchange-Traded Funds (ETFs), and staking services.

Category IIA

This licence category is specific to the operation of hedge funds or alternative investment funds. These are high-risk pooled funds, generally with a qualifying threshold for investors.

Due to the nature of their investments, hedge funds are typically considered separate from regular investment services. This licence category only applies to three recipients.

Highlights

Now that we are familiar with the licence categories, we can examine some of the highlights from the 75 crypto licences that were awarded.

Diverse Range of Providers

The diverse array of crypto licences awarded is a reassuring sign of the market’s stability and potential. It includes well-known names in the crypto asset provider space, such as Luno and Altcoin Trader, and traditional finance (Trad-Fi) entities, such as Momentum, venturing into crypto.

This variety paves the way for various products and approaches, fostering inclusivity and expansion opportunities.

Specialization in Services

Some firms on the list have opted to specialize in services. While this may seem counterintuitive, given the insight into the diversity of the providers, it is a positive note along with the diversity.

Some firms have opted only for a single-category licence, indicating specialization of offers and services.

Evolution of Financial Products

The licensing in the multiple categories also suggests we will soon see a new era of financial products in South Africa.

Thus far, much of the activity in the cryptocurrency space in Africa has come in the form of trading platforms. With the licencing, including advisory, investment services, and hedge funds, new and exciting products are on the horizon.

Absence of Binance

The absence of Binance, one of the largest crypto service providers in the world and a key player in the African market, is a notable highlight.

While Binance has been active in South Africa and the African continent, its absence from the list of licensed entities raises questions about its future operations in the country. This underscores the evolving nature of the South African cryptocurrency market and the potential for new players to emerge.

See the complete list of 75 crypto licences.

What crypto licences mean for crypto in South Africa

While it is just a list of 75 entities and the licence category they were awarded, it should still be considered a big win for South Africa and its approach to regulating cryptocurrency.

The days ahead will have more information as the CASPs start rolling out products and programs for crypto enthusiasts. It is perhaps fortunate that this announcement comes at a time when the cryptocurrency market as a whole is trading at new highs after enduring a particularly crypto winter in 2023.

With cryptocurrency currently in favour and the headwinds pointing towards the market going even higher, CASPs have the perfect conditions to introduce new products to the market that will find popularity with South Africans.

It is important to note that while crypto has been on the rise in general, the South African Rand has gone in the opposite direction against major currencies. We covered Revix, a company that offered currency hedging to South Africans before the decision on regulation.

The company is among the CASPs that received their crypto licences under its incorporated name, RVX SA Capital (pty) Limited. We are sure to see others offering the service or something similar.

Like the global crypto landscape, South Africa has also witnessed its share of illicit activities associated with cryptocurrency. Scams and frauds have been perpetrated through or in the name of cryptocurrency.

The recent resurgence of the infamous MMM Ponzi scheme as MMM Krypto is a stark reminder. However, with proper consumer education, the licensing initiative can significantly reduce the potential losses for South African citizens in the future, instilling a sense of empowerment and security.

All eyes on South Africa

The list of authorized CASPs under South Africa’s FAIS Act provides a snapshot of the evolving landscape of crypto asset services. It signifies a blend of established players and emerging innovators, all operating within a regulated framework to ensure consumer protection and market stability.

Understanding this landscape is crucial for stakeholders navigating the crypto market, as it reflects the industry’s breadth, depth, and trajectory towards maturity.

With the issuance of the CASP licences, we anticipate a surge of innovation and development in the South African cryptocurrency space.

The licensed entities now have the authority to handle cryptocurrency-related services for South Africans, and they are expected to play a significant role in shaping the market’s future.

This development underscores the dynamic nature of the South African cryptocurrency market and the potential for new and exciting developments shortly.