SOUTH AFRICA: EXEMPTION OF PERSONS RENDERING A FINANCIAL SERVICE IN RELATION TO CRYPTO ASSETS FROM CERTAIN REQUIREMENTS
Our update dated 25 October 2022 in which we outlined the Financial Sector Conduct Authority’s (FSCA) declaration of crypto assets as ’financial products’ in terms of the Financial Advisory and Intermediary Services Act 2002 (FAIS) and publication of the draft exemption of persons rendering a financial service in relation to crypto assets from certain requirements for public comment (Draft Exemption from Certain Requirements) refers.
The FSCA has been alive to the fact that it may not be necessary nor practicable to subject providers of financial services related to crypto assets (Crypto Asset FSPs) to certain FAIS-related requirements. In this regard, the FSCA has finalised the Draft Exemption from Certain Requirements and published FSCA FAIS Notice 25 of 2023 which exempts persons rendering financial services in relation to crypto assets from certain requirements of, amongst others, the General Code of Conduct for Authorised Financial Services Providers and Representatives 2003 (General Code), Board Notice 123 of 2009 and the Determination of Fit and Proper Requirements for Financial Services Providers 2017 (F&P Requirements)(Final Exemption from Certain Requirements).
The most significant change that was made to the Draft Exemption from Certain Requirements is the removal of the exemption of Crypto Asset FSPs, their Key Individuals (KIs) and Representatives from section 23 of the F&P Requirements. This change has been necessitated by the FSCA’s amendment of the list of recognised qualifications to cater for Crypto Asset FSPs, their KIs and Representatives, which therefore means that section 23 of the F&P Requirements applies as is to Crypto Asset FSPs, their KIs and Representatives (as is the case with all other FSPs).
The FSCA has also amended paragraph 2(1) of the Draft Exemption from Certain Requirements to clarify that the exemption from section 13 of the General Code applies only insofar as it relates to the rendering of financial services in respect of crypto assets. Where a financial services provider is also licensed for other financial products in addition to crypto assets, the exemption is not applicable in respect of the other financial products.
The other amendments made to the Draft Exemption from Certain Requirements are mostly cosmetic in nature and made for clarity purposes. The full Final Exemption from Certain Requirements notice can be accessed here.