South Africa’s financial watchdog issued nearly 250 licenses to VASPs in 2024 and is still considering over 50 more amid a surge in digital asset trading on local platforms.
The Financial Sector Conduct Authority (FSCA) revealed in an update that since it implemented a new licensing regime in June 2023, it had received 420 license applications. It approved 248 applicants and declined nine. A further 106 applicants voluntarily withdrew their applications after consulting with the watchdog. Voluntary withdrawal allows the applicant to re-apply later after remedying the shortfalls.
However, according to the regulator, 106 firms had given up on digital assets altogether after consultations showed that their business models were not suited to the sector.
The FSCA is still considering 56 applications.
Among the VASPs that received a license this year are Luno and VALR, two of the largest exchanges in the country. Three months later, the watchdog issued a new batch of 63 applicants, with others, like EA Capital, receiving the license towards the end of the year.
In its latest update, the FSCA revealed that the declined applications fell short on two main criteria: operation ability and competency. On the latter, the applicants failed to prove they had the requisite knowledge and practical experience to operate the VASP business.
The regulator warned VASPs operating without a license of dire legal consequences. It also reminded investors that its authority over VASPs only extends to companies offering ‘crypto-related’ financial services; “This authorisation does not include the recognition of crypto assets as a legal form of tender or “cryptocurrency,”‘ it stated.
South Africa is one of Africa’s largest digital asset markets, and in 2024, it was recognized by ConsenSys as a global leader in digital asset ownership. Last year, local VASPs say the bull market reignited this interest, with most platforms recording some of their highest numbers in years.
Luno was among the VASPs that saw a rise in trading activity, revealed Christo de Wit, the exchange’s country manager for South Africa. However, de Wit believes that regulatory clarity has also played an important role.
“Regulation across the world has increased the legitimacy of crypto. In SA, crypto asset service providers like Luno were officially recognised as financial service providers in 2024,” he stated.
VALR CEO Farzam Ehsani also revealed that the exchange hit one million users for the first time late last year.
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