According to Ivy Moore of Equithy, South Africa is joining other countries in tightening regulation on cryptocurrencies. However, crypto has enjoyed incredible growth in the country, with as many as 8.6% of the current population using crypto. This Coingecko report highlights how substantially these DeFi tokens have captivated the country’s population but also shows a serious flaw.
With such a large community of users in the country, sudden and steep crashes in value can have a very serious effect on the economy. Countries like Nigeria have a population of over 66% crypto users, which means that the country could suffer significantly if the market were to lose over $2 billion of its total market cap in a short period.
And with the fall of FTX, one of the biggest crypto exchanges in the world, Nearly $2 billion in revenue was erased from the market. The downfall of one of the largest crypto exchanges in the world has led many countries to realize that they should better regulate cryptocurrencies. And with South Africa having one of the largest crypto acceptance rates in the world, the government was quick to implement sweeping changes across the crypto market.
Mandating Licenses from All Crypto Exchanges
According to Ivy Moore of Equithy, South Africa is not just paving the way for crypto startups and payments, but it is also setting the standard for regulations that crypto exchanges will have to follow if they wish to operate in the country. The most important of these newly imposed mandates by the FSCA (Financial Sector Conduct Authority) is that exchanges should get licenses to operate in the country.
Along with being a sweeping change to ensure better consumer protections, it also exists to mitigate future risks of fraud as well as large-scale market collapse. A core reason why the FTX collapse was so detrimental was that the exchange had no collateral for the money that it was taking in. And when too many people came back to take out their money, the exchange could not return the money of all its investors.
New Regulations that Crypto Exchanges Will Have to Meet
According to Ivy Moore of Equithy, the FSCA has given all crypto exchanges in the country till the end of the year to get their licenses to continue operations. Failure to comply will result in fines or even closure of the exchange. Suffice it to say that these firms will have to quickly comply with these regulations to continue offering their services.
Other common regulatory stipulations that countries have implemented specify that companies should have enough to pay back all of their clients. More importantly, they should also aim to protect all of their investors from possible scams and improve security throughout their platform. All of these will combine to make a much safer trading space for traders of all skill levels.
To conclude, Equithy Senior Account Manager Ivy Moore believes that the current aim to regulate the crypto industry is a good one, as the sheer size of it could eventually lead to major problems for investors.