This blog was co-authored by Julian Scholtz, Candidate Attorney.
During October 2022, the Financial Sector Conduct Authority (FSCA) declared crypto assets to be a financial product under the Financial Advisory and Intermediary Services Act, 2002 (FAIS Act). The FSCA provided an update on 11 May 2023 and published the Exemption of Persons Rendering a Financial Service in Relation to Crypto Assets from Certain Requirements, 2023 (Exemption).
The FSCA previously published a general exemption of persons rendering financial services in respect of crypto assets on 21 October 2022 (Crypto Asset FSPs). The effect of that exemption was that Crypto Asset FSPs could continue to render financial services in respect of crypto assets without being licensed, provided that an application for a license under the FAIS Act is made between 1 June 2023 and 30 November 2023. This exemption will continue to apply until the license application submitted within the period has been finally approved or declined.
FAIS Notice 29 of 2023 introduces crypto assets as a product sub-category to the FSP forms which need to be completed and submitted to the FSCA by Crypto Asset FSPs.
While Crypto Asset FSPs are required to be authorised by the FSCA, the Exemption provides that:
- a Crypto Asset FSP is exempt from the requirement to maintain suitable guarantees, professional indemnity or fidelity insurance cover;
- a Crypto Asset FSP and its key individuals are temporarily exempt from the regulatory examinations for a period of eighteen months from the effective date of the Exemption (11 May 2023), which will allow existing crypto asset providers to continue rendering financial services in relation to crypto assets while they take steps to complete the regulatory examinations; and
- a supervised representative of a Crypto Asset FSP, who was not previously appointed as a representative of a financial service provider, is exempt from the regulatory examination requirements, on the condition that they complete the relevant regulatory examinations within two years from the date on which they were first appointed.
The following additional conditions are imposed by the Exemption:
- a Crypto Asset FSP, its key individual and representatives must complete a minimum of six hours of CPD activities relating to crypto assets per CPD cycle; and
- a supervised representative of a Crypto Asset FSP must complete a minimum of six hours of CPD activities relating to crypto assets per CPD cycle:
- starting from the date on which they meet the applicable regulatory examination requirements and qualification requirements; or
- within six years from the date on which they were first appointed, whichever occurs first.
It is important to take note of the Exemption as any failure by a Crypto Asset FSP, their key individuals and representatives to comply with any condition of the Exemption, will automatically result in the exemption no longer being applicable.