REGULATION | South African Regulator, FSCA, Pursuing 30 Crypto Firms Operating Without Licenses

The Financial Sector Conduct Authority (FSCA) of South Africa is currently running 30 investigations into unauthorized crypto-related financial services within the country.

This is according to the organization’s latest regulatory actions report that outlines the measures they have put in place to enable safe operations of crypto firms.

“The Enforcement Division established an investigation team to deal specifically with persons or entities that did not apply for a licence or whose licence applications have been declined, and who are conducting crypto financial services unlawfully. There are currently 30 cases under investigation,” the report indicates.

“In the interest of protecting the public and in support of fairness in the industry, the FSCA will act decisively against unlawful CASPs. The FSCA will make the outcome of its investigations known and will publish warnings if it discovers unregistered crypto business.”

The regulator, who recently approved a further 63 licence applications, to bring the number of licensed CASPs in South Africa to 138, noted that crypto exchanges in the country are also facilitating scams with fraudsters using multiple accounts opened at banks at crypto exchanges as part of their fraudulent activities to avoid detection.

“Clients are often offered unrealistic returns, sometimes within a few hours of investing. Fraudsters share fake positive reviews and fabricated screenshots of returns in these groups. They portray wealthy lifestyles on social media and frequently request additional funds to process their withdrawals.”

The regulator notes that financial customers in the country are at risk from ever more sophisticated technologies that are being deployed by fraudsters.

“With the advent of artificial intelligence and rapid software development, the FSCA has observed a surge in deepfake scams. Fraudsters use AI and other technologies to create fabricated, high-quality videos, images, audio, or text content that imitate public figures and successful businesspeople to promote scams.”

In April 2024, as reported by BitKE, FSCA opened investigations into online trading platform, BanxSo, into ‘possible contraventions of financial sector laws’ for deceptionally using images of prominent business figures like billionaires Elon Musk and Patrice Motsepe in its advertising and promotional efforts.

In addition to unauthorised crypto-related financial services, other areas of heightened risk to financial customers in South Africa include:

• Non-compliance with anti-money laundering regulations
• Un-licenced over-the-counter derivative provider activities
• Copy trading and signals

According to current crypto regulations, entities that continue operations without applying for registration could face a fine of up to R10 million or even a criminal conviction and a prison sentence of up to 10 years. The regulator is also prepared to shut down non-compliant firms.

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