The Financial Services Conduct Authority (FSCA) has released a draft declaration on crypto assets to be deemed as financial products bringing them firmly into the regulatory fold. Essentially, this requires anyone providing advice or services around crypto assets must be authorised to do so, in terms of the FAIS Act.
All financial advisers, brokers, as well as financial services providers, crypto asset exchanges and platforms will be subject to this regulation.
Richard Rattue, MD of Compli-Serve SA welcomes the Declaration as the next logical step in the process. “Bringing some regulatory certainty to the growing crypto asset marketplace is a necessary and important step at this stage given the exponential growth of the crypto space. Regulators worldwide are taking note of the increasing use of crypto assets, and the related importance to provide a regulatory framework to accommodate these assets as soon as possible.”
The Declaration seeks to highlight the risks that come with crypto assets more effectively. “A robust process is required when giving advice, which must include a thorough risk assessment, which will be unique to every client,” Rattue says.
Change on the horizon
Current regulatory change lends itself to the process of managing market conduct and related consumer risk as much as possible. This will be enshrined, with forthcoming over-arching legislation for the entire financial services industry via COFI and the related conduct standards. “While this is still a work in progress, it’s good to see crypto assets coming into the regulatory mix.”
Rattue says that technology is a huge enabler of change and the implementation of Regulatory Technology (RegTech) will very much be part of the next chapters – for both crypto assets and how clients are managed.
“Looking ahead client appetite for crypto assets coupled with forthcoming regulations will mean another product that requires authorisation to market, before trading or placing any crypto assets into client portfolios is possible. RegTech will enable this process as well.”
Regulation will make way for crypto assets to be used properly in the financial system. Comments are open on the Declaration to 28 January 2021. “I suspect that there will be a positive response given the growing need for transparency and that we can only move forward given how quickly interest in crypto assets is gaining pace,” Rattue concludes.