Second crypto health warning for consumers issued by South African regulator

A second crypto health warning for consumers was issued by South Africa’s regulator, the Financial Sector Conduct Authority (FSCA) after noting a recent rise in crypto-related losses. The regulator reminded cryptocurrency investors that since these assets are not regulated, there is no legal recourse should “something go wrong.”

“The FSCA urges the public to be extremely cautious and vigilant when dealing with cryptos for any financial services business,” the FSCA said in the warning. The regulator also expressed its concern over the “increasing volume of crypto assets (cryptos) related losses suffered by financial consumers in the past three months.”

The second warning came after the collapse of the Bitcoin Ponzi scheme Mirror Trading International (MTI), according to Bitcoin.com. MTI is the biggest crypto scam last year according to Chainalysis’s annual crypto crime report.

This time, the FSCA specifically warned the public of scams by unregulated entities that promise high rewards. “The high risk 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,” the regulator said.

The agency also reminded the investing public to exercise caution since they might end up having no legal recourse against these entities. “The FSCA would like to emphasize, crypto-related investments are not regulated by the Authority or any other body in South Africa,” the regulator added. “As a result, if something goes wrong, you are not likely to get your money back and will have no recourse against anyone.”

In the warning, the FSCA also shared that it is “working on finding measures to regulate certain aspects and players in the crypto asset space.” The regulator is part of the seven-member Intergovernmental Fintech Working Group (IFWG) that published its position paper in November 2020, which contained its recommendations on crypto regulation.

“The draft Declaration in no way impacts the status of crypto assets in the context of other laws such as the Financial Sector Regulation Act (FSR Act) exchange control regulations, requirements under the Pension Funds Act (PFA) and Collective Investment Schemes Act (CIS Act)and so forth, nor does it attempt to regulate, legitimize or give credence to crypto-assets,” the FCSA said in the warning.

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