The Financial Sector Conduct Authority (FSCA) has issued a second ‘health’ warning to South Africans about cryptocurrency transactions in the country.
The authority said it has ‘noted with concern’ the increasing volume of crypto asset-related losses suffered by financial consumers in the past three months.
“The FSCA urges the public to be extremely cautious and vigilant when dealing with cryptos for any financial services business,” it said.
Crypto assets – including cryptocurrencies as they are commonly called – are digital representations of value that are not issued by a central bank.
Some of the more well-known crypto assets include Bitcoin (BTC) and Ethereum (ETH). Crypto assets are traded, transferred and stored electronically. They have been used for payments, investments and capital-raising.
The FSCA warned that crypto-related investments are not regulated by the Authority or any other body in South Africa.
As a result, if something goes wrong, you are not likely to get your money back and will have no recourse against anyone.
“The high risks already inherent in crypto assets is further being compounded by scam activity, as well as unregulated firms targeting consumers with marketing material that highlights the rewards, but not the potential downside, of investing in crypto.
“It is for this reason that the FSCA is working at finding measures to regulate certain aspects and players in the crypto asset space.”
The FSCA said that these measures will be rolled out during the coming months and, the authority said its is working with other members of the Intergovernmental Fintech Working Group (IFWG) to better understand and regulate where appropriate crypto assets in South Africa.
“Retirement fund trustees must also remain vigilant in their fiduciary duties before mandating investment managers to expose their fund assets to risks associated with crypto assets.
“The FSCA currently discourages such investments by retirement funds until regulation has been finalised to safeguard investors.”
The authority said consumers who wish to invest in any investment asset or product – specifically unregulated, risky ones such as cryptos – that if it sounds too good to be true, it usually is.
“Consumer caution is strongly advised to avoid painful or catastrophic financial losses,” it said.
Read: South Africa’s banks are ‘too big to fail’ – but government is drawing up a plan in case they do