FSCA

Regulator Claims South Africa Set to Unveil Cryptocurrency Regulatory Framework in Early 2022

11/12/2021 by Idelto Editor

In early 2022, South Africa will have a new regulatory framework that covers cryptocurrencies, a commissioner with a regulatory body has said.

Highly Risky Products

South Africa’s financial sector regulator, the Financial Sector Conduct Authority (FSCA) is set to unveil a new regulatory framework that covers cryptocurrency in early 2022.

According to Unathi Kamlana, a commissioner with FSCA, the new framework will determine how the trading of crypto coins like bitcoin (BTC) should be conducted. In his remarks during an interview, Kamlana suggested his organization was not keen on legitimizing highly risky products. The commissioner said:

What we want to be able to do is to intervene when we think that what is provided to potential customers are products that they don’t understand that are potentially highly risky. We must be very careful to not just legitimize them.

The FSCA, which is reportedly drafting the crypto trading rules in conjunction with other regulatory bodies, will also examine how the currencies interact with traditional financial products and if these pose a threat to financial stability.

Cryptos Do Not Pose a Systemic Risk

Still, in his remarks, Kamlana asserts that cryptocurrencies do not pose a systemic risk to the stability of the financial services sector just yet. The commissioner however said the FSCA sees cryptos as assets and not currency.

Meanwhile, in keeping with the stance adopted by several countries, Kamlana urged South Africans to shun privately issued/created digital currencies which are not as stable and reliable as stablecoins issued by central banks.

“I think that if I were to give advice to retail investors, I would say wait to see what comes out of the process of the work of the central bank. The best outcome in terms of stable coins is what comes out of central bank innovation, given their reliability and stability,” said Kamlana.

What are your thoughts about this story concerning South Africa’s regulatory framework for digital assets? Tell us what you think in the comments section below.

After Warnings from South African Regulators Binance Rejects Accusations It Provides Financial Advice

05/09/2021 by Idelto Editor

Beleaguered crypto exchange, Binance, has released a statement in which it denies accusations that provides financial advice or renders any intermediary services. In a statement released on Twitter less than 24 hours after the Financial Sector Conduct Authority (FSCA)’s warning, the crypto exchange also denies having any ties or links to the organization “Binance Group.”

Binance Not Associated With Binance Group

Instead, Binance suggests in its September 3 Twitter thread that the FSCA might have erred when it issued the warning. The thread explained:

Binance Group’ is not a Binance.com entity, please be mindful of scammers pretending to be associated with Binance.com.

As reported by Bitcoin.com News, the FSCA did ask South Africans to be “cautious and vigilant when dealing with Binance Group” because the crypto platform is not authorized per South African laws. The FSCA also alleges that Binance — which it says is situated in Seychelles — maintains a Telegram chat group that “members of the South African public can join to gain access to its exchange platform.”

In its riposte, Binance acknowledges that it has a Telegram group but is quick to point out that this is merely for promoting “blockchain education and community announcements.” Binance also added:

It’s not intended, nor does it provide any financial advice. This community is moderated by admins and Binance angels.

Binance Collaborating With South African Regulators

Meanwhile, in another statement, Binance said it is committed to “taking a collaborative approach in working with regulators and law enforcement globally.” Binance is said it is “continuously collaborating with the Financial Intelligence Centre (FIC), the major regulator of financial crimes in South Africa.”

In fact, as the statement explains, Binance has already “collaborated with the FIC on over 462 cases.” Binance goes on to state that the FIC itself “collaborates with the FSCA for investigations when necessary.” Despite pointing out that the exchange is already working with regulators, Binance confirmed it had “reached out to the FSCA for more clarification on their statement.”

What are your thoughts on this response by Binance? Tell us what you think in the comments section below.

South African Regulator Apologizes to Crypto Firm After Issuing Then Withdrawing a Warning in Less Than 24 Hours

09/05/2021 by Idelto Editor

South Africa’s Financial Sector Conduct Authority (FSCA) has apologized to a Cape Town-based crypto start, Ovex, less than 24 hours after warning that the firm was operating outside the law.

Ovex Does Not Require Licence From FSCA

In its May 7 retraction, the financial watchdog said the findings of an investigation into Ovex, which specializes in crypto arbitrage services, suggest that the firm is operating outside the FSCA’s purview. The statement says:

Based on the information provided by Ovex we are satisfied that Ovex does not currently require a licence from the FSCA, as its business activities fall outside the current jurisdiction of the FSCA. The previous media release has been retracted.

Meanwhile, the FSCA’s about-face comes after its head of enforcement, Brandon Topham, was quoted in the local media defending the regulator’s initial handling of the matter. Responding to a media inquiry, Topham admitted that the issuing of the warning did not mean Ovex was “operating unlawfully.” Instead, the warning statement, according to Topham, was intended to urge the investing public to be cautious when dealing with Ovex “as they are making claims of returns.”

However, according to a report, the FSCA executive did admit at the time that the regulator might have “jumped the gun” and that an amendment to its warning statement would be made once more information was obtained.

Regulator Panic

In the meantime, the same report also carried Ovex’s initial response to the “damaging” warning that it said was “issued without giving the company time to respond to questions sent earlier in the week.” In its statement, Ovex said:

It seems [as if] there may have been panic, and the announcement was made without proper process. Ovex always acts in a 100% compliant, legal, and ethical manner, seeking legal and compliance advice with every action.

The crypto firm also said it had stopped its advertising campaign until this issue was resolved and that it expected the FSCA to issue a full retraction.

What do you think of the FSCA’s withdrawal of the public warning against Ovex? Tell us what you in the comments section below.

Mirror Trading International Named Biggest Crypto Scam of the Year After Raking in $589 Million

14/02/2021 by Idelto Editor

Blockchain analysis firm, Chainalysis’ latest crime report has named Mirror Trading International (MTI) as the biggest cryptocurrency scam of 2020. Chainalysis arrived at this conclusion after an investigation found that MTI had taken in $589 million from more than 471,000 deposits. According to the report, MTI’s haul is significantly higher than that of Forsage and J-enco, the next biggest scams. Both scams raked in less than $350 million each.

More South African Victims

Meanwhile, in the report’s brief focus on MTI, Chainalysis reveals that more than half of MTI’s web traffic had originated from South Africa. On the other hand, Canada, Mexico, the United Kingdom and the U.S together account for nearly a quarter of the remaining web traffic. Using this web traffic data, the blockchain analysis firm concludes that “most MTI victims hail from these countries in similar proportions as well.”

Separately, the blockchain analysis firm’s report also found that the BTC that was sent to MTI came “primarily from exchanges.” The so-called self-hosted wallets were also used. The report then details how MTI resorted to using a popular gambling service to launder investor funds. The report explains:

Perhaps most interesting is MTI Club’s apparent usage of a popular cryptocurrency gambling service as a money laundering and cash out mechanism. The platform is the biggest risky destination of MTI funds by volume, having received $39 million worth of cryptocurrency from the scam in 2020.

As noted by one venture capitalist Dovey Wan, this use of gambling platforms has become “a common money laundering technique for many cybercriminals who use cryptocurrency.” This is because gambling platforms can be “used similarly to mixers to obscure the origins and flows of illicitly-obtained funds.”

How MTI Lured Its Victims

As has been reported by news.Bitcoin.com, MTI succeeded in luring unsuspecting victims by promising consistent daily returns of 0.5%. This rate of return would translate to “yearly gains of 500%.” On its website, MTI claimed that these high returns were guaranteed by “its AI-powered foreign exchange trading software.”

However, MTI’s unrealistic promises soon led to scam allegations. Initially, executives of MTI denied allegations they were operating a multi-level marketing scam after regulators in the U.S. and South Africa pounced on the company. Still, sometime after the Financial Sector Conduct Authority (FSCA) raided homes of some MTI executives, reports emerged of investors failing to withdraw their funds. As pressure grew, CEO Johann Steynberg eventually disappeared with investors funds. This ultimately led to the collapse of MTI.

In the meantime, the Chainalysis crime report concludes that the MTI scam is one good example of “why the industry must spread the word that algorithmic trading platforms promising unrealistically high returns are nearly always scams.” The report also says that cryptocurrency exchanges and other services must “discourage users from sending funds to those addresses or at least warn them that financial losses are highly likely.”

Do you agree that MTI was the biggest scam in 2020? Tell us what you think in the comments section below.

South African Regulator Warns Crypto Investors to ‘Be Prepared to Lose All’ Following Collapse of Bitcoin Trading Company MTI

05/02/2021 by Idelto Editor

South African Regulator Warns Crypto Investors to 'Be Prepared to Lose All' -No Legal Recourse for Victims of Scams

The Financial Sector Conduct Authority (FSCA) has issued what it terms crypto health warning after receiving many complaints from South African victims of crypto scams. In the warning, the FSCA reminds prospective investors that crypto-related investments are currently not regulated. Therefore, investors have no recourse against anyone should they get duped.

Cryptocurrencies Are High-Risk Assets

The FSCA’s warning comes a few weeks after an executive with the regulatory body bemoaned the challenges of regulating cryptocurrencies and how scammers are taking advantage of this. The official singled out the now collapsed Mirror Trading International (MTI) as an example of how scammers now use cryptocurrencies to evade regulation.

Meanwhile, in the latest warning, the FSCA reminds South African investors to be on the lookout for crypto companies that “overstate potential pay-outs or understate the risks.” The South African regulator, just like its peers in the U.K. and New Zealand, reiterates the message that crypto investors can potentially lose everything.

The FSCA statement warns:

Investing in crypto assets, or investments and lending linked to them, generally involves taking very high risks with investors’ money, which mean that you should be prepared to lose all of your money.

The regulator also adds that “there is no guarantee that crypto assets could be converted back into cash.” This, according to the regulator, puts “consumers at the mercy of supply and demand in the market.”

The Power of the Fear of Missing Out

In the meantime, the FSCA’s warning statement also offers a glimpse of what the regulators perceive to be the drivers of crypto-asset prices.

The regulator says:

The price of crypto assets is dictated by the underlying mood or sentiment of the general public with no underlying basis for value determination. The prices are driven by the worldwide sentiment which is driven by persons who have an interest in the value of the crypto asset being driven up.

The FSCA officials believe Ponzi operators and some crypto influencers are taking advantage of the fear of missing out (FOMO) to convince new and inexperienced investors into buying crypto assets. Therefore, to help investors, the FSCA warning also offers some useful tips for investors that wish to buy crypto assets.

For instance, according to the regulator, cryptocurrencies “should only make up a small proportion of their investment portfolio” regardless of the risk. Investors are also urged to “obtain proper advice regarding the overall suitability of such high-risk product in your investment portfolio and the impact on it should it fail.”

The FSCA concludes its statement by reminding potential buyers of crypto assets that “if an investment looks too good to be true, it usually is.”

Do you agree with the FSCA’s assertions that cryptocurrency prices are driven by the public’s underlying mood? You can share your views in the comments section below.