Fintech & Cryptocurrency law
We assist businesses in all areas of Fintech and Cryptocurrency Law
Because financial technology (fintech) is relatively new and has developed faster than legislative processes, and because the nuances of blockchain applications are varied, Fintech and Crypto Law covers a broad range of regulations, many of which were formulated before its existence. As such, it covers laws and regulations in the fields of financial services, ITC, exchange control and tax, and involves keeping abreast of these regulations as they change to adapt to it.
Blockchain technology itself is advancing in major financial services institutions such as banks and insurance companies, and the regulatory implications cross over a broad area of law.
In addition, crypto assets are soon to be deemed “financial products” under the applicable financial services regulations imposing potential licensing obligations on those who work in the cryptocurrency investment space.
Caveat’s Fintech and Crypto Law team is multi-disciplinary, and includes financial services, tax and technology law experts, which enables us to provide appropriate advice to cryptocurrency brokers, advisors, exchanges and platforms in this developing landscape.
We apply financial services expertise to a solid understanding of the technology to advise in this exciting and evolving area of law.
- Kerry Kopke, Caveat Panel Member
Fintech Law & Regulations
The Fintech legal sector has seen an increase of activity in recent years spurred on by the disruptive nature of blockchain technology, distributed ledgers, smart contracts and the use of artificial intelligence and data analytics. Regulators recognise the potential of the fintech innovations and are responding to them by regulating this sector. Our experience includes advising some of the leading financial institutions on fintech legal and regulatory issues and advising technology companies and start-ups across the sector.
Cryptocurrency Law & Regulations
Cryptocurrency Law and Regulations are rapidly evolving in South Africa and globally. There are two major regulatory changes that have been promised by the regulatory authorities. Crypto asset service providers will have to be regarded as accountable institutions under the Financial Intelligence Centre Act, 2001 (FICA) and accordingly will have statutory cash reporting and monitoring obligations. In addition, crypto assets will be declared “financial products” under the Financial Advisory and Intermediary Services Act, 2002 (FAIS) requiring crypto asset service providers to register for a financial services provider licenses under FAIS. With the new Conduct of Financial Institutions Bill expected to come into effect in 2022/2023, the expectation is that crypto assets will potentially have their own set of regulations which will apply exclusively to them.
The South African Revenue Services (SARS) currently taxes individuals on their cryptocurrency investments in the form of capital gains tax. We expect further developments in this area in the short-term in respect of reforms to the application of the foreign exchange controls on the export and import of cryptocurrency to and from South Africa. There is also an indication of possible impending investment-related taxes on cryptocurrency funds.
Legal Advice for Cryptocurrency Brokers, Advisors, Exchanges and Fintech Providers
The fintech regulatory landscape is constantly evolving and could present first-mover fintech opportunities for those who keep up-to-date with these developments. We also expect major regulatory developments for crypto assets in the short-term and accordingly we advise crypto asset service providers to seek legal advice on charting their compliance strategy with these new regulations.
Caveat is able to assist fintech providers with the following:
- Decentralised Finance (DeFi);
- Decentralised Autonomous Organisations (DAOs);
- Financial Services Regulation;
- Initial Coin Offerings (ICOs);
- Payment services;
- RegTech; and
- Smart contracts.
We also provide regulatory advice, legal opinions and drafting of agreements in compliance with the regulatory framework currently applicable.
Frequently asked questions on Fintech & Cryptocurrency Law
There is no blockchain-specific law in operation in South Africa, but depending on the field/sector within which the technology is deployed, the regulations relevant to that sector will apply.
- Financial Intelligence Centre Act, 2001 (FICA);
- Financial Advisory and Intermediary Services Act, 2002 (FAIS); and
- Conduct of Financial Institutions (COFI) Bill (expected to come into effect in 2022/2023)
This refers to taxes levied on gains made in cryptocurrency transactions. The South African Revenue Services (SARS) currently taxes individuals on their cryptocurrency investments in the form of capital gains tax. We expect further developments in this area in the short-term in respect of reforms to the application of the foreign exchange controls on the export and import of cryptocurrency to and from South Africa. There is also an indication of possible impending investment-related taxes on cryptocurrency funds.
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