South African regulator the Financial Sector Conduct Authority recently issued its second crypto â€œhealth warningâ€ after it noticed increased reports of crypto-related losses suffered â€œin the past three months.â€ In the warning, the regulator reminds investors that since cryptocurrencies are â€œnot regulated by the authority or any other body,â€ there will be no legal recourse â€œif something goes wrong.â€
Unregulated Firms and Promises of High Rewards
The FSCAâ€™s second warning comes in the wake of the collapse of the Mirror Trading International (MTI), a bitcoin Ponzi scheme. As reported by Bitcoin.com News, MTI was subsequently identified as the biggest crypto scam in 2020 by a blockchain analysis firm, Chainalysis, in its annual crypto crime report.
However, in its latest warning, the South African regulator also zeroes in on scams and promises of very high rewards often made by unregulated entities. The health warning says:
Consequently, the regulator says it is now â€œworking on finding measures to regulate certain aspects and players in the crypto asset space.â€ Until that happens, the FSCA is urging retirement fund trustees to remain â€œvigilant in their fiduciary duties before mandating investment managers to expose their fund assets to risks associated with crypto assets.â€
Crypto Regulation Position Paper
Meanwhile, in the latest warning, the FCSA reveals ongoing steps by South African bodies to regulate the crypto industry. As explained in the warning document, the FCSA is part of the seven-member Intergovernmental Fintech Working Group (IFWG) that published its position paper in November 2020. The position paper lists â€œa variety of recommendations pertaining to the regulation of crypto assets.â€
However, the regulator reiterates in its warning document that this position paper does not presently have an impact on the legal status of cryptocurrencies in that country. The FCSA states:
Nevertheless, the regulator says it expects a rollout of the new measures being worked on to start in â€œthe coming months.â€
What are your thoughts on the FSCAâ€™s second health warning? Tell us what you think in the comments section below.
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