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Crypto Asset Service Providers Further Regulated

The Minister of Finance has amended the Schedules to the Financial Intelligence Centre Act of 2001 (FICA) which comes into effect on 19 December 2022. The amendments include crypto asset service providers (CASPs) within the definition of an “accountable institution” in Schedule 1 of FICA. CASPs will have to register with the Financial Intelligence Centre (FIC) and comply with all of the “accountable institution” obligations under FICA including know-your-client verification processes, cash threshold reporting and suspicious transaction reporting obligations. 

The FIC envisages an 18-month transitional period from the date of commencement of the amendments where it will focus on entrenching the FICA risk and compliance provisions for the new sectors added to Schedule 1, but it does not anticipate issuing financial penalties for the new sectors for non-compliance with FICA during the transition period.

CASP is defined in Schedule 1 of FICA as “a person who carries on the business of one or more of the following activities or operations for or on behalf of a client: (a) Exchanging a crypto asset for a fiat currency or vice versa; (b) exchanging one form of crypto asset for another; (c) conducting a transaction that transfers a crypto asset from one crypto asset address or account to another; (d) safekeeping or administration of a crypto asset or an instrument enabling control over a crypto asset; and (e) participation in and provision of financial services related to an issuer’s offer or sale of a crypto asset .” 

In respect of this provision, a “crypto asset” means a “digital representation of perceived value that can be traded or transferred electronically within a community of users of the internet who consider it as a medium of exchange, unit of account or store of value and use it for payment or investment purposes, but does not include a digital representation of a fiat currency or a security as defined in the Financial Markets Act, 2012.”

Companies operating within the definition of CASP are encouraged to use the transition period wisely by registering with the FIC and complying with the obligations placed on accountable institutions under FICA. Reach out to Caveat Legal should you need further guidance on these developments or advice on their application to your business.

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