The ‘where Lambo’ crowd will have spent much time over the 2025-2026 holiday season rehashing what could have been. Around October, they were salivating over the prospects of their Bitcoin holdings hitting some of the more outlandish 2025 price predictions. But by Old Year’s Eve, a sub-USD90k per coin ‘close’ was locked in.
Volatility begets scrutiny
Bitcoin hit an all-time high in October 2025 at around USD124k per coin, causing optimism that price forecasts made by the likes of Standard Chartered (USD200k), Van Eck (USD180k) and JP Morgan (USD125-170k) might be achieved. Instead, the emerging asset class disappointed investors with a negative 5% move over the full year. Price volatility and the often-unrealistic return promises across the crypto asset universe explain why this asset class remains top of mind for South Africa’s financial conduct regulator.
Late last year, Financial Sector Conduct Authority (FSCA) Commissioner Unathi Kamlana issued an update on the licensing and supervision of crypto asset service providers (CASPs) conducting business locally. Kamlana noted that by 12 December 2025, the authority had received 512 CASP licence applications, of which 300 had been approved and 14 declined. Additionally, 121 applications were voluntarily withdrawn by applicants following engagements with the FSCA on the appropriateness of their business and operating models.
The FSCA commenced the licensing process for CASPs under the Financial Advisory and Intermediary Services (FAIS) Act, though the function will eventually transfer to the Conduct of Financial Institutions (COFI) Bill. Under COFI, financial institutions will be authorised within a single, outcomes-based conduct framework, with permissions aligned to activities, business models and risk profiles rather than discrete product categories. It is proposed that current FAIS licences be migrated into COFI through a managed transition.
Reasons for CASP licence rejections
Some insights into the approach to licensing can be gleaned from the reasons given by the FSCA for declined CASP applications. These centre around “the failure of applicants to meet the applicable fit and proper requirements under the FAIS Act” with two major shortcomings shortlisted.
One, applicants failed to provide clear and comprehensive business plans and business model descriptions outlining their crypto asset activities and key business and operational frameworks to support such activities. Two, they failed to demonstrate the requisite knowledge and practical experience pertaining to crypto assets.
The hope is that tighter regulatory scrutiny will help to prevent repeats of the oversight failures that South African financial services consumers have suffered over the years. Case in point, the widely publicised collapse of Banxso (Pty) Limited. After passing the various hurdles for licensing, that business imploded in spectacular fashion, leaving thousands of investors out of pocket. The FSCA eventually withdrew Banxso’s licence in July 2025, followed by a record R2 billion administrative penalty on the company and certain of its directors in December. Several individuals involved in the management of the business were also debarred and fined.
Defining crypto and the law
Readers must stay informed about the legal status of crypto assets and ensure that their advice practices keep pace with the evolving financial product landscape. A notable local development is that, as of October 2022, the FSCA declared crypto assets to be “financial products” for the purposes of the FAIS Act. This declaration brought providers of financial services related to crypto assets within the FSCA’s regulatory remit, meaning the authority’s licensing powers extend to advice, intermediary and investment management services in this realm.
The FSCA’s December 2025 press release included a useful definition of crypto assets as a digital representation of value that is not issued by a central bank but is capable of being traded, transferred or stored electronically for payment, investment and other forms of utility; that applies cryptographic techniques; and that uses distributed ledger technology. Cryptocurrencies are not yet recognised by the South African Reserve Bank (SARB) as legal currency, and the South African Revenue Service (SARS) treats Bitcoin, Ethereum and similar tokens as assets subject to tax rather than as currencies.
CASPs should expect heightened regulatory scrutiny due to the risky nature of their investing and trading activities. In addition to being supervised as financial services providers (FSPs) under the FAIS Act, the FSCA is also responsible for supervising these businesses in respect of their anti-money laundering (AML), countering financing of terrorism (CFT) and countering of proliferation financing (CFP) compliance under the Financial Intelligence Centre (FIC) Act. And any institution or person found to be conducting CASP-related activities without a licence will be subject to enforcement action by the FSCA.
Investigations on the rise
According to the FSCA, they have already initiated 81 investigations into potential unlicensed CASP businesses. Of these, 25 cases were closed as no enforcement action was required, mainly because the investigated parties ceased trading or were dormant. More than 50 cases are still under investigation entering the New Year. Licensed businesses are under the microscope too, with 10 supervisory inspections on CASPs carried out in the first quarter of 2025 and a further 30 set down for the remainder of the 2025-2026 financial year.
“Most of these inspections cover the full range of compliance requirements under the FIC Act and are intended to provide an initial assessment of the ability of newly licensed CASPs to comply with their regulatory obligations in line with their inherent AML/CFT/CFP risk exposures,” the FSCA wrote. A supervisory visit typically places a business’ risk assessments and governance arrangements under close scrutiny. FSPs that adhere to compliance and risk management best practice have little to fear.
Future CASP regulation will unfold in collaboration with the industry. Per the FSCA: “In August 2025, we established the Crypto Asset Supervisory Engagement Forum (CASEF) for regular engagements with the CASP industry.” This forum will help develop a deeper understanding of the risks, trends and challenges facing CASPs; allow for education, information sharing and outreach with the sector; enhance compliance with regulatory obligations; and facilitate coordination and alignment between regulatory agencies on industry expectations, risk management, regulatory developments and supervisory approaches.
Yes, you need to sit the RE
One of the major developments in the past year was the 30 June 2025 lapse of the exemption granted to licensed CASPs and their key individuals (KIs) from Part 4 of Chapter 3 of the Determination of Fit and Proper Requirements (Board Notice 194 of 2017) relating to regulatory examinations (RE). The original exemption expired on 11 November 2024 but was extended by six months. From midyear 2025, all licensed CASPs and their KIs needed to fulfil the applicable RE requirements.
You can find a full, up-to-date list of licensed CASPs on the FSCA’s website. The list also provides details of FSPs whose CASP licence applications were initially approved by the FSCA, but that subsequently decided to remove crypto assets from their service offerings. Additionally, the list highlights entities that have subsequently allowed their licences to lapse or have them withdrawn.
Recent regulatory developments point to a more intrusive and outcomes-focused regulatory environment for crypto asset businesses operating in South Africa. Advisers and intermediaries must avoid being won over by clever marketing or innovation and instead apply the same due diligence to CASPs as they would to other financial services or investment partners. Regulators are showing zero tolerance for poorly governed crypto models.
Writer’s thoughts:
Crypto asset products are being held to the same conduct and governance standards as traditional financial products. Is the current approach sufficient to protect consumers without stifling innovation? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
