Crypto assets now classified as a financial product – what does this mean?

Bruce Whitfield interviews the FSCA’s Eugene Du Toit and Farzam Ehsani, CEO of VALR.com.

Crypto assets are now regarded as a financial product in South Africa.

The Financial Sector Conduct Authority (FSCA) has announced the classification in terms of the Financial Advisory and Intermediary Services Act, also known as FAIS.

It’s a long awaited move that brings crypto assets under regulation in the country for the first time.

We’re still in the very early stages of understanding how crypto is going to transform the global financial system, and today’s Declaration is an important milestone in this journey.

‘ Farzam Ehsani (@farzamehsani) October 19, 2022

Bruce Whitfield talks to the FSCA’s Eugene Du Toit (Head of the Regulatory Frameworks Department) to find out what this means, exactly.

Du Toit explains that FAIS lists a number of financial products like collective investment schemes, insurance, and securities and crypto assets were previously excluded.

Crypto assets were not previously included in that list, and now it is, and so essentially we are regulating any activity falling within those definitions of advice and intermediary services in relation to crypto assets.

Now crypto assets are included and, essentially, we are regulating any activity falling within the definitions of advice and intermediary services in relation to crypto assets.

Eugene Du Toit, Head: Regulatory Frameworks Dept- Financial Sector Conduct Authority

A crypto asset is used as an investment vehicle… and how were treating it at this stage is to say it resembles a financial product – you invest in it, you get returns from it, but now there are certain regulations that will apply.

Eugene Du Toit, Head: Regulatory Frameworks Dept- Financial Sector Conduct Authority

Financial advisers are required to follow a certain protocol when advising in terms of traditional-type investment products, du Toit points out.

This would entail for instance doing a proper needs analysis of the client’s situation and considering the risks of the product.

Those aspects weren’t previously regulated [for crypto assets] and now they are… Hopefully it will result in more appropriate investment by consumers, and advisers not advising them to invest in prods that are act not suitable for them.

Eugene Du Toit, Head: Regulatory Frameworks Dept- Financial Sector Conduct Authority

The crypto industry broadly welcomes the move with open arms says Farzam Ehsani, co-founder and CEO of VALR.com.

It’s about time… because as Eugene says this brings crypto assets into the regulatory net. It’s an asset that has monetary value of around a trillion US dollars at the moment.

Farzam Ehsani, Co-founder and CEO – VALR.com

For more detail, scroll up to listen to the audio

This article first appeared on CapeTalk : Crypto assets now classified as a financial product – what does this mean?