The Crypto Assets Regulatory (CAR) Working Group (WG) of the Intergovernmental Fintech Working Group (IFWG) recommend that South Africa employ a staged approach to bring crypto assets within the regulatory remit through the regulation of crypto asset service providers (CASPs).

On April 14, 2020 the IFWG introduced its Position Paper on Crypto Assets, which aligned closely with the FATF Virtual Asset Guidelines. The paper introduced the term Crypto Asset Service Provider or CASP as a new class of regulated institutions that aligns with the FATF VASP definition. CASPs are required, according to the paper, to comply with FATF’s AML/CFT measures like FATF’s Recommendation 16 on the Travel Rule.

On June 11th, the IFWG released a second position paper IFWG: CAR WG Position Paper on Crypto Assets, which outlines 25 Recommendations for a revised South African policy, legal and regulatory position on crypto assets and related activities. The paper essentially provides a regulatory roadmap for South African virtual assets service providers.

The South African government has made significant progress in regulating crypto assets since the initial recommendations of the CAR Working Group. Most notably:

1. In October 2022, the Financial Sector Conduct Authority (FSCA) declared crypto assets as 'financial products' under the Financial Advisory and Intermediary Services Act (FAIS).
2. The licensing process for Crypto Asset Service Providers (CASPs) began on June 1, 2023. Existing institutions providing crypto-related financial services were required to submit license applications by November 30, 2023.
3. The Financial Intelligence Centre (FIC) has issued Directive 9, which requires CASPs to implement the "Travel Rule" for crypto asset transfers by April 30, 2025. This aligns with the Financial Action Task Force's (FATF) Recommendation 16.
4. CASPs are now considered accountable institutions under the Financial Intelligence Centre Act (FICA).

These developments demonstrate South Africa's commitment to regulating the crypto asset industry, focusing on consumer protection, anti-money laundering measures, and aligning with international standards. The country is positioning itself as a potential crypto hub in Africa, with a regulatory framework that aims to balance innovation and risk management.

1. Is cryptocurrency legal in South Africa?

Yes. South Africa’s view is that crypto is a financial product and should be regulated as a financial product. The country recognizes cryptocurrencies as an investment and taxable asset, yet not as legal tender.

(IFWG) 2020 Position Paper on Crypto Assets page 3:

“As an interim measure, the Crypto Assets Regulatory Working Group recommends that crypto-assets be declared a financial product through the provisions of the Financial Advisory and Intermediary Services Act 37 of 2002 (the FAIS Act).”

‍

🇿🇦 View South African VASPs on the Notabene Network 

Explore the Network

‍

2. Are there AML crypto regulations in South Africa?

Yes. Crypto Asset Service Providers (CASPs) were included as accountable institutions under the Financial Intelligence Centre Act (FICA) on December 19, 2022. This inclusion was part of amendments to Schedule 1 of FICA, which were published in Government Gazette 47596 on November 29, 2022, and came into effect on December 19, 2022.

As accountable institutions, CASPs are now required to:

1. Register with the Financial Intelligence Centre (FIC)
2. Implement customer identification and verification procedures
3. Conduct customer due diligence
4. Appoint a compliance officer
5. Train employees on FIC Act compliance and risk exposure
6. Undertake business risk assessments for money laundering, terrorist financing, and proliferation financing
7. Maintain and implement a risk management and compliance program
8. File regulatory reports on suspicious and unusual transactions

3. Is the Crypto Travel Rule mandated in South Africa?

The Financial Intelligence Centre (FIC) has issued Directive 9, which requires CASPs to implement the "Travel Rule" for crypto asset transfers by April 30, 2025. 

4. Who regulates cryptocurrency in South Africa?

The Financial Sector Conduct Authority (FSCA) is the cryptocurrency regulator in South Africa. The South African financial overseer added cryptocurrency into its regulatory oversight in June 2021.

Additionally, the FIC oversees anti-money laundering (AML) and counter-terrorist financing (CTF) measures for crypto assets. CASPs were included as accountable institutions under the Financial Intelligence Centre Act (FICA) on December 19, 2022.

FATF Travel Rule requirements in South Africa

1. Are there licensing or registration requirements for VASPs in South Africa?

Yes. 

1. CASPs must obtain a Financial Service Provider (FSP) license from the Financial Sector Conduct Authority (FSCA). The FSCA declared crypto assets as financial products on October 19, 2022, making this licensing mandatory.
2. Registration: CASPs are required to register as "accountable institutions" with the Financial Intelligence Centre (FIC) under the Financial Intelligence Centre Act (FICA)

3. Does South Africa permit a grace period to comply with the Crypto Travel Rule?

Yes, South Africa does permit a grace period to comply with the Crypto Travel Rule. The grace period spans from the publication date of Directive 9 (November 15, 2024) to the effective date (April 30, 2025), giving CASPs approximately 5.5 months to prepare for compliance. 

‍{{training2="/cta-components"}}

‍

Complying with the FATF Crypto Travel Rule in South Africa

1. What is the minimum threshold for the Crypto Travel Rule in South Africa?

All transactions, regardless of amount, are subject to Travel Rule obligations. However, a wider scope of information must be transmitted for transactions of R5000 and above (as detailed in the subsequent question).  

2. What personally identifiable information is required to be shared for the Crypto Travel Rule in South Africa?

3. Are there differences in requirements for customer PII for cross-border transfers vs within South Africa?

No. 

4. What are the non-custodial or self-hosted wallet requirements in South Africa?

CASPs must develop, document, maintain, and implement risk-based policies and procedures for handling crypto asset transfers involving self-hosted wallets. These policies must outline the processes for obtaining additional information on self-hosted wallets when a higher risk of money laundering, terrorist financing, or proliferation financing is identified. CASPs are required to incorporate these policies and procedures into their Risk Management and Compliance Programme (RMCP) as mandated by section 42 of the FIC Act. This approach allows CASPs to assess and manage the risks associated with unhosted wallets on a case-by-case basis, rather than imposing blanket restrictions

Why choose Notabene for Crypto Travel Rule Compliance in South Africa?

Notabene helps South African financial institutions and CASPs comply with the FATF’s Recommendation 16 “Crypto Travel Rule” and the FIC Act as required by the Intergovernmental Fintech Working Group (IFWG). South African VASPs can use our tools and partner integrations to:

• Conduct customer identification and verification
• Perform customer due diligence
• Keep records
• Monitor for and report to the FIC suspicious and unusual activity on an ongoing basis
• Report transactions of R25 000.00 and above
• Locate and report transactions that may be linked to terrorist activity or terrorist organizations as required by the FIC Act
• and more…