South African Regulator Zeroes in on Scams and Unregulated Firms in Its Second Crypto ‘Health Warning’

South Africa’s regulator, the Financial Conduct Authority, recently issued a second health warning on cryptocurrencies after seeing an increase in reports of harm from cryptocurrencies over the past three months. In a warning, the regulator reminds investors that because cryptocurrencies are not regulated by any authority or other body, there is no recourse if something goes wrong.

Unregulated companies and promises of high profits

ACSE’s second warning comes after the collapse of Mirror Trading International (MTI), a bitcoin Ponzi scheme. According to Bitcoin.com News, MTI was later identified by blockchain analytics firm Chainalysis as the biggest crypto scam of 2020 in its annual Crypto Crime Report.

However, in its latest warning, the South African regulator has also highlighted the scams and promises of very high profits often made by unregulated organisations. A health warning reads:

The high risk already inherent in investing in cryptocurrencies is exacerbated by fraud and by unregulated companies approaching consumers with marketing materials that highlight the benefits, but not the potential drawbacks, of investing in cryptocurrencies.

As a result, the regulator says it is currently working on measures to regulate certain aspects and players in the crypto asset space. In the meantime, the ACSE urges pension fund trustees to consider their fiduciary duties before asking investment managers to expose their funds’ assets to crypto risk.

Position paper on cryptography regulation

In its latest alert, the SSCA reveals the steps South African authorities are currently taking to regulate the cryptocurrency industry. As explained in the alert document, the FCCA is part of the seven-member Intergovernmental Working Group on Printing (IWG), which released its position in November 2020. The position paper makes several recommendations for the regulation of crypto assets.

However, the regulator reiterated in its warning document that the position paper does not currently affect the legal status of cryptocurrencies in the country. FTSA states:

The draft statement does not affect the status of crypto assets in the context of other laws, such as. B. the Financial Sector Regulatory Act (FSRA), foreign exchange control regulations, Pension Fund Act (PFA) and Collective Investment Schemes Act (CISA) regulations, etc., nor does it seek to regulate, legitimize, or give credibility to crypto assets.

However, the regulator said it expects the introduction of the new measures currently being developed to begin in the coming months.

What do you think of the FSCA’s second health warning? Tell us what you think in the comments below.

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