LERATO LAMOLA-OGUNTOYE & ANALISA NDEBELE | The Financial Intelligence Centre’s guide for crypto asset services providers

After amending the list of accountable institutions in Schedule 1 to the Financial Intelligence Centre Act (FICA), the Financial Intelligence Centre (FIC) has published the final guidance for crypto asset services providers (CASPs).

CASPs are listed as accountable institutions because of the risk that crypto assets may be used to facilitate money-laundering and terrorist financing. The FIC said crypto assets are vulnerable to abuse by criminals due to their potential use in cross-border transactions, the pseudonymous nature of ownership of crypto assets and because transactions can occur seamlessly without being in-person.

In considering whether a person is a CASP, the FIC has clarified that the emphasis will be on the economic activities or operations undertaken, rather than the technology, platform or type of crypto asset used for the transaction.

A person will be a CASP if they carry out the business of one or more of the five activities or operations: listed in term 22. 

The activities or operations must be performed for a profit or commercial gain, as a regular feature of the business undertaken by the person for or on behalf of a client. Individuals that perform crypto asset activities in their personal capacity are excluded from item 22.

The Public Compliance Communication 57 gives examples of activities that fall under each of the five activities scoped under item 22:

1. Exchanging a crypto asset for a fiat currency or vice versa:

An example of this activity would be where a client exchanges crypto assets for rand with the assistance of a CASP, or where a client purchases crypto assets from a CASP whose business is the buying or selling crypto assets.

2. Exchanging one form of crypto asset for another:

Where a client requests a CASP to take a certain crypto asset in exchange for other crypto assets. The CASP is providing the services to the client at a cost as part of the CASP’s business.

3. Conducting a transaction that moves a crypto asset from one crypt asset address of account to another:

This arises when a client wishes to move crypto assets from one digital wallet to another and uses the CASP to do so.

4. Safekeeping or administration of a crypto asset or an instrument enabling control over a crypto asset:

The CASP in this instance offers safe holding of crypto assets or the private keys to the crypto asset on behalf of its clients.

5. Participation in and provision of financial services related to an issuer’s offer or sale of a crypto asset:

For example, a business determines that there will be an initial coin offering*. The business offers its clients and prospective customers financial services (advice or intermediary services) related to the initial coin offering.

Once it is deemed as an accountable institution, a CASP must register with the FIC. It is important to maintain a risk-based approach when assessing whether a person qualifies as a CASP. 

* Lerato Lamola-Oguntoye is a consultant and Analisa Ndebele is an associate from Webber Wentzel