The crypto industry in South Africa has been gaining momentum in recent years, with a significant number of individuals owning crypto assets. However, a recent study conducted by the Financial Service Conduct Authority (FSCA) sheds light on the revenue generated by companies offering crypto-related services and the need for proper regulation.
According to the FSCA’s Crypto Assets Market Study, the majority of companies in the crypto industry make less than R50 million in revenue annually. Only 5% of these companies generate over R150 million in revenue. This data highlights the relatively small size of the sector compared to the traditional finance industry.
The study also revealed that over 5.8 million South Africans own crypto assets, with Bitcoin being the most popular choice. This widespread adoption of crypto assets prompted the FSCA to declare cryptocurrencies as financial products in October 2022. This decision allows crypto trading platforms to obtain licenses and places them under the regulatory purview of the FSCA.
Awelani Rahulani, the head of the FSCA’s fintech division, emphasized the need for regulation in the crypto industry. While the sector may be small compared to traditional finance, it still poses a risk to financial stability.
As ordinary South Africans engage with crypto products and the broader economy, the industry’s proper regulation becomes crucial to safeguard the economy and the financial sector. The study also highlighted the revenue sources of crypto service providers.
The majority of their income comes from trading fees charged to individuals buying and selling crypto assets on their platforms. Some providers also charge administration fees and advisory fees. However, it is concerning that the value of crypto assets traded monthly in South Africa remained stagnant throughout 2022.
Despite the slow growth of the crypto industry, the FSCA recognizes the need for proactive regulation. There has been a shift from a “wait and see” approach to more active regulation. The FSCA plans to closely monitor and regulate the space to ensure the industry operates within a regulated framework.
The FSCA’s study has compelled the organization to take action due to the widespread adoption of crypto assets in South Africa. By understanding the revenue generated by companies in the industry, the FSCA can respond effectively with regulatory frameworks, product licensing, and supervision.
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