South Africa’s Financial Sector Conduct Authority (FSCA) has cracked down on major international cryptocurrency exchanges that offer services such as margin trading.
Margin trading essentially allows you to bet on whether the price of a cryptocurrency will rise or fall and then receive a payout many times greater than simply buying and selling the underlying token.
However, depending on the amount of leverage you select for such a trade, even a slight price move in the wrong direction could cause you to lose your entire bet.
Therefore, it is an extremely risky and highly rewarding way to trade. Especially considering the volatility of the cryptocurrency market.
The FSCA has started its enforcement on the platforms that offer these types of products with the largest exchange by trading volume in the world – Binance. Binance also offers up to 100x leverage on select cryptocurrencies.
It started with a strangely worded warning published in September. In October, Binance announced that South Africans would be banned to access its margin trading functionality.
This year, the FSCA issued warnings against two other major exchanges – FTX and ByBit.
Following the warning from the FSCA, the two companies said that they contacted the regulator to try to resolve the problem.
FSCA Enforcement Officer Brandon Topham explained to MyBroadband that their moves against these platforms have nothing to do with them being crypto exchanges.
“If they are offering a derivative product with crypto as the underlying or reference asset, then they and others must register as an over-the-counter (OTC) derivatives provider,” Topham said.
“It has nothing to do with crypto and everything to do with derivatives.”
He said they weren’t specifically targeting cryptocurrency exchanges.
“We are considering speaking with a number of ODP providers who are not registered with us.”
Topham said that in addition to registering as an ODP if they offer margin trading, crypto-asset service providers currently do not need to obtain a license to operate in South Africa. .
“We plan to create a regulatory environment in which they can be registered in order to protect customers and legitimate actors from the exploitation. It’s currently ongoing,” Topham said.
The FSCA has published its intention to report crypto assets as a financial product and that work is ongoing, he said.
“Once the public comment process and our response is finalized, the framework will be in place and we will be one of the most progressive countries in the world at this point,” Topham said.
“We want to activate. We are not trying to stop development. We just can’t rush into it.