Crypto Assets in SA are now recognised as financial products!

08 November 2022
Accounting
South African Accounting Academy

The Financial Sector Conduct Authority (FSCA) published General Notice 1350 of 2022 in Government Gazette 47334, wherein "crypto assets" were declared 'financial products' under section 1 of the Financial Advisory and Intermediary Services Act No. 37 of 2002 (FAIS Act). In terms of the Notice and for purposes of the FAIS Act, a "crypto asset" is a digital representation of value that:

is not issued by a central bank but is capable of being traded, transferred, or stored electronically by natural and legal persons for payment, investment, and other forms of utility;
applies cryptographic techniques; and
uses distributed ledger technology.

The FSCA stated that that the regulation and licensing of crypto assets is intended to protect consumers from crypto scams and empower the authorities to take action against such crypto scammers. Even though the FSCA supports the Notice, it deliberately referred to crypto assets as opposed to cryptocurrencies, as the FSCA does not believe that cryptocurrency meets the criteria for currency.

The FSCA reiterated that currency (or legal tender) must:

store value,
have a unit of account,
have general acceptance and
be a medium of exchange.

Click here to download the Gazetted Notice:

https://www.gov.za/sites/default/files/gcis_document/202210/47334gen1350.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

The FAIS Act (Financial Advisory and Intermediary Services) is yet another piece of legislation that your clients must comply with, and which you must assess compliance with. If they don’t comply with the relevant laws and regulations, you have certain reporting obligations in terms of NOCLAR (NOn-Compliance with Laws And Regulations) – this could include reporting to management, qualifying your audit opinion, reporting a Reportable Irregularity, etc.
You need to be aware of General Notices that are gazetted by relevant regulators, such as the FSCA.
As an auditor and independent reviewer, you need to consider whether your clients have correctly accounted for and disclosed crypto assets correctly in their financial statements.
As an accountant, you need to consider the proper disclosure of crypto assets for entities that you are compiling financial statements for.

Relevance to Your clients:

An entity (company or close corporation) has a duty to comply with the FAIS Act, and must ensure that Crypto Assets are correctly disclosed in their financial statements.
Entities should be aware of General Notices that are gazetted by relevant regulators, such as the FSCA.

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