The South African regulator, the Financial Sector Conduct Authority, recently issued its second encryption “health warning” after it noticed an increase in reports of encryption-related losses “in the past three months.” In the warning, the regulator reminded investors that since cryptocurrencies are “not subject to the supervision of the authorities or any other agency”, “if something goes wrong, there will be no legal recourse”.
Unregulated companies and promises of high returns
The second warning from the FSCA came after the bankruptcy of the Bitcoin Ponzi scheme Mirror Trading International (MTI). As reported by Bitcoin.com News, MTI was subsequently identified as the biggest crypto scam in 2020 by blockchain analysis company Chainalysis in its annual crypto crime report.
However, in recent warnings, South African regulators have also zeroed out promises of fraud and change, and promised that unregulated entities will often give high remuneration. The health warning says:
Scam campaigns and unregulated companies target consumers with marketing materials that highlight the inherent high risks of crypto assets. These marketing materials emphasize the returns from investing in crypto, but do not bring potential negative impacts. .
Therefore, the regulator stated that it is now “working hard to find measures to regulate certain aspects and participants in the crypto-asset field.” Prior to this, the FSCA urged pension fund trustees to remain “vigilant, and then force investment managers to transfer their fund assets. Expose to the risks associated with crypto assets.”
Cryptocurrency Regulatory Position Paper
At the same time, in the latest warning, the FCSA revealed the measures being taken by South African institutions to regulate the cryptocurrency industry. As stated in the warning document, the FCSA is part of the seven-member Intergovernmental Financial Technology Working Group (IFWG), which issued a position paper in November 2020. The position paper lists “various suggestions on the regulation of crypto assets.”
However, the regulator reiterated in its warning document that the position paper does not currently have an impact on the country’s legal status of cryptocurrency. FCSA statement:
In the context of other laws (such as the “Financial Sector Management Act” (FSR Act), Foreign Exchange Control Regulations, “Pension Funds Act” (PFA) and “Collective Investment Scheme Act” (CIS Act), the draft declaration does not affect The status of encrypted assets, etc.), and will not try to supervise, legitimize or give trust to encrypted assets.
However, the regulator said that it expects “new measures” to be rolled out in the “next months”.
What is your opinion on the second health warning of FSCA? Tell us what you think in the comments section below.
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