The Financial Sector Conduct Authority (FSCA) of South Africa, on February 4, 2021, put out a press release on crypto-related investments, due to a large number of complaints received on the loss of savings and investments in cryptocurrencies via scams or ponzi schemes packaged as a crypto investment promising unrealistic high returns.
In the press release, FSCA briefly explained what cryptocurrencies are all about and made it known that they are not issued by a central bank. They are being traded, transferred or stored in a crypto-enabled wallet which can be used for payments, investments and funds-raising.
According to the Financial Sector Conduct Authority (FSCA), crypto-related investments are not regulated by them nor are these digital currencies under the control of any other government body in South Africa. When an individual makes an investment in any crypto project which later goes sour, the probability of getting their money back is low and they will have no recourse against anyone.
Back in December 2020, Mirror Trading International (MTI), a bitcoin trading firm, went into provisional liquidation after the CEO, Johann Steynberg took along with him, a large amount of bitcoin that investors had entrusted to the company. Steynberg had allegedly absconded from the country to Brazil.
Mirror Trading International (MTI) claimed to have more than 260,000 investors from 170 countries in the world, in which they were promised 10% Return on Investment (ROI) per month. The investigations conducted by FSCA into the company’s operations shows that it kept no accounting records, or any kind of user database and there was no evidence of successful trading by MTI.
Earlier in August 2020, the Financial Sector Conduct Authority (FSCA) had already warned potential investors against putting their funds in Mirror Trading International (MTI), based on the fact that the firm had been operating without a mandatory financial service provider license and an unusual return on investment. This move came after the promoters of MTI in the United States were shut down by regulators in July 2020.
The increasing rate of crypto scams in the country is alarming, which is driving the South African authorities towards sounding the cryptocurrency health warning alarm again and finding measures to regulate certain aspects and players in the crypto space. Despite the high level of risk associated with crypto investments, it is further compounded with diverse ponzi schemes.
Whilst the South African government has flirted with the regulation of cryptocurrencies for years, they are increasingly forced into creating laws that will restrict transactions of cryptocurrencies. These fraudulent investment schemes like MTI, take advantage of the popularity of cryptocurrencies across the world, and use it to siphon the public of their hard-earned money.
The South Africa Financial Sector Conduct Authority (FSCA), reveals that they are working with the other members of the Intergovernmental Fintech Working Group (IFWG) to better understand and regulate appropriate cryptocurrencies in South Africa. These regulations will be rolled out during the coming months. The FSCA had already classified cryptocurrencies as financial products back in December, 2020.
The crypto watchdog, FSCA, further advised the masses to do their own prudent research and make sure to look out for the license of FSCA before investing in any crypto-related project. The FSCA also discouraged investment of retirement funds until regulation has been finalised to safeguard investors.
