South African Financial Sector Ombudsman Says Crypto Complaints have Increased

An advocate, Nonkumbolo Tshombe works with the Financial Advisory and Intermediary Services (FAIS) ombudsman in South Africa, revealed recently that her office had seen a significant increase in the number of complaints related to crypto in the 2020/2021 financial year. Even though they had received many of these complaints, she had explained that her organization hadn’t been able to do much about these inquiries because the country has not yet regulated cryptocurrencies. The advocate explained that crypto asset products did not fall within the office’s jurisdiction because they are not categorized as financial products. 

It is a fact that South Africa does not regulate cryptocurrencies as yet, but the Financial Sector Conduct Authority (FSCA) has intervened and even taken action against certain individuals or entities. For instance, in order to assist those who had invested in Mirror Trading International (MTI) in recovering their funds, the FSCA had taken a number of steps, which included raiding the homes of one of the people considered to be the masterminds behind it. Furthermore, it had also been reported that the FSCA had also issued public advisories for warning the people against dealing with certain crypto organizations, as well as their products. 

It is because of such advisories that renowned global crypto exchange, Binance, had to put an end to its operations in South Africa. According to recent reports, there is a strong possibility that South Africa may just be getting a crypto regulatory framework. This was pointed out after the FSCA had made a statement back in June, which indicated that they were contemplating the idea of declaring these cryptocurrencies as a financial product. Tshombe believes that this declaration will push the FSCA forward to regulate the intermediary and advisory component of these crypto-assets as well. 

In addition, she also said that with this declaration, her office would also be able to do something about the increasing crypto-related complaints they have been receiving. She disclosed that they had gotten around 10,552 complaints alone in the 2020/2021 financial year alone. They are working on a regulatory framework for crypto quickly because the number of crypto scams continues to rise in South Africa. The approach they are planning to use would mean tougher rules for the crypto sector, primarily because of the numerous scams that have occurred recently. The new rules are expected to be introduced in 2022. 

For now, crypto service providers have been operating in South Africa completely unchecked, even as the popularity of these digital assets has taken off. While the FSCA doesn’t believe that crypto are a risk to the financial services sector yet, it has said that it considers it an asset instead of a currency. This theme seems to be going around, not just in South Africa, but in other countries as well. Many that are thinking about regulating crypto do not want it to be used as a means of payment. An example is India, which is also working on a crypto bill that’s likely to regulate these digital assets in the country. 

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