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FSCA issues crypto health warning

Mar 25, 2021

The FSCA wants to warn the public that if something goes wrong with your crypto investment, you are not likely to get your money back and will have no recourse against anyone.

FSCA issues crypto health warningThe Financial Sector Conduct Authority (FSCA) has noted with concern the increasing volume of losses related to crypto-assets suffered by the public in the past three months. The FSCA urges the public to be extremely cautious and vigilant when dealing with cryptos for any financial services business.

Crypto-assets (including cryptocurrencies as they are commonly called), are digital representations of value that are not issued by a central bank. Some of the more well known crypto-assets include Bitcoin (BTC) and Ethereum (ETH).

These assets are traded, transferred and stored electronically. They have been used for payments, investments and capital-raising.

In November 2020, the FSCA as part of the Intergovernmental Fintech Working Group (IFWG) comprising of the National Treasury, South African Reserve Bank and Prudential Authority, Financial Intelligence Centre, National Credit Regulator, and South African Revenue Services, published a position paper — The Draft Declaration of crypto-assets as a financial product under the Financial Advisory and Intermediary Services Act — which made a variety of recommendations pertaining to the regulation of crypto-assets.

Submissions for public comment closed on 28 January 2021, and are currently under consideration by the relevant authorities.

The draft Declaration in no way impacts the status of crypto-assets in the context of other laws such as the Financial Sector Regulation Act (FSR Act), exchange control regulations, requirements under the Pension Funds Act (PFA) and Collective Investment Schemes Act (CIS Act) and so forth, nor does it attempt to regulate, legitimise or give credence to crypto-assets.

No regulation means no recourse

Recently, following the high volumes of complaints to the FSCA, and regular media reports of consumers losing some if not all of their savings in high-risk crypto investments as well as crypto-adjacent scams, a crypto health warning was published to the public, highlighting the risky nature of these crypto-assets/products, services and scams.

The FSCA would like to emphasise that crypto-related investments are not regulated by the Authority or any other body in South Africa. As a result, if something goes wrong, you are not likely to get your money back and will have no recourse against anyone.

The high risks already inherent in crypto-assets is further being compounded by scam activity, as well as unregulated firms targeting consumers with marketing material that highlights the rewards but not the potential downside of investing in crypto.

It is for this reason that the FSCA is working at finding measures to regulate certain aspects and players in the crypto-asset space.

These measures will be rolled out during the coming months and we are working with other members of the IFWG to better understand and regulate, where appropriate, crypto-assets in South Africa.

Retirement fund trustees must also remain vigilant in their fiduciary duties before mandating investment managers to expose their fund assets to the risks associated with crypto-assets. The FSCA currently discourages such investments by retirement funds until regulation has been finalised to safeguard investors.

The FSCA again reminds consumers who wish to invest in any investment asset or product — specifically unregulated, risky ones such as cryptos — that if it sounds too good to be true, it usually is. Consumer caution is strongly advised to avoid painful or catastrophic financial  losses.

This post was based on a press release issued on behalf of the Financial Sector Conduct Authority (FSCA).

4 Comments

  1. Hi,I lost your contact, please send me something thank you.

    Reply
  2. I agree that cryptocurrencies are high risk but then there are a lot of other high risk ventures that if you loose your money then it is lost. It is the scammers that we have to be very aware of and on our toes. Who do you go to when you have lost your investment. The main reason I went into crypto was because I am tired of bank charges and the government having possible access to my funds where I could wake up tomorrow and the government took half their populations’ savings from their bank like in Greece. The government is trying to get their hands on the private RA’s so making it difficult for people cashing them in. So yeah I am into cryptocurrency and I am staying with them and yeah I just have to be wary of hackers and wary of scammers.

    Reply
    • What is interesting is that crypto is being regulated and the regulation is being welcomed by the platforms to try curb the scamsters. There is even a question on crypto in your tax return. I don’t know for how long it will stay completely out of regulatory oversight

      Reply

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Maya Fisher-French author of Money Questions Answered

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