Sebastian Sinclair

<div id="highlights-block_635100fe205d2" class="highlights">
 <ul>
 <li>The country’s financial regulator has issued a general notice defining crypto within a legal framework</li>
 <li>Crypto, as defined by the regulator, must possesses cryptographic properties and not belong to a central bank</li>
 </ul>
 
</div>



South Africa’s primary markets regulator formally established legal definitions for cryptoassets on Wednesday, joining other nations on the continent in their efforts to increase industry oversight.



The Financial Sector Conduct Authority (FSCA) issued its <a href="https://www.gov.za/sites/default/files/gcis_document/202210/47334gen1350.pdf" target="_blank" rel="noreferrer noopener">general notice</a>, defining crypto as financial instruments under the country’s financial services act, which brings the asset class in line with other regulated financial products.



Its definition widens the possibility for greater adoption of crypto in South Africa, which had already allowed citizens to freely hold and trade them.



Specifically, the FSCA’s declaration defines crypto as a distributed ledger technology-based asset not issued by a central bank and employing cryptographic techniques.



The asset must also be tradable and capable of being stored electronically for the purpose of payment and investment or other forms of utility, the regulator said.



Under the <a href="https://www.gov.za/sites/default/files/gcis_document/201409/a37-020.pdf" target="_blank" rel="noreferrer noopener">Financial Advisory and Services Act 2002</a>, a financial product is defined as any money-market instrument, company shares, securitized debt and securities, among other things.



Several nations across the continent have in place provisions for dealing with crypto, including <a href="https://cms.blockworks.co/central-african-republic-looks-for-quick-wins-becomes-second-country-to-adopt-bitcoin/" target="_blank" rel="noreferrer noopener">The Central African Republic</a> which adopted bitcoin as legal tender in February, becoming the second country in the world to do so.



Also in February, <a href="https://www.bloomberg.com/news/articles/2022-02-02/botswana-to-regulate-crypto-that-was-feared-becoming-wild-west" target="_blank" rel="noreferrer noopener">Botswana</a> passed a bill to regulate the trading of digital assets in a bid to tighten anti-money laundering measures.



The stance towards crypto across various African countries remains divided, however. Nigeria, for instance, has a bank ban in place for trading digital assets despite the country launching its own central bank digital currency, the eNaira in October 2021.



Several nations, including Cameroon, Egypt, Morocco and Tunisia also have bans in place against investing and using crypto, fearing the asset could pose a significant risk to their economic sovereignty.



Many other countries of the 54-member continent are yet to implement formal crypto regulations, with many of their central banks cautioning against their use.



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<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
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South Africa

South Africa Defines Crypto as Financial Product

Jocelyn Yang

<div id="highlights-block_62be1b9a741ae" class="highlights">
 <ul>
 <li>The alleged scam is the largest fraudulent scheme involving bitcoin in any CFTC case</li>
 <li>The regulator said MTI “misappropriated, either directly or indirectly, all of the bitcoin they accepted from the pool participants”</li>
 </ul>
 
</div>



The Commodity Futures Trading Commission has filed civil charges against Cornelius Johannes Steynberg and his South Africa-based bitcoin pool operator Mirror Trading International Proprietary Limited (MTI) Thursday over fraud and registration violations. 



In a lawsuit filed in the US District Court for the Western District of Texas, CFTC alleged MTI’s CEO Steynberg accepted at least 29,421 bitcoin from approximately 23,000 individuals in the US and even more throughout the world, to “participate in the commodity pool without being registered as a commodity pool operator as required,” according to CFTC’s <a href="https://www.cftc.gov/PressRoom/PressReleases/8549-22" target="_blank" rel="noreferrer noopener">statement</a>. 



It was the “largest fraudulent scheme involving bitcoin charged in any CFTC case,” the regulator said.&nbsp;



The statement also said the CFTC will seek full restitution to defrauded investors, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against future violations of the Commodity Exchange Act and CFTC regulations.&nbsp;



The CFTC said in the complaint that MTI claimed to have a proprietary “bot” or software program that would help investors grow their trading gains. Yet, no such software program existed, the regulator said — Steynberg and his firm “misappropriated, either directly or indirectly, all of the bitcoin they accepted from the pool participants.”



Steynberg had been a fugitive from South African law enforcement. He was recently arrested by Brazilian police on an INTERPOL arrest warrant, according to the agency.&nbsp;



A representative of MTI couldn&#8217;t be reached to comment immediately.



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Bitcoin

CFTC Charges South African Bitcoin Pool Operator With $1.7B Fraud

Jacquelyn Melinek

<div id="highlights-block_621e76fb8de4a" class="highlights">
 <ul>
 <li>“There is no longer any room for doubt regarding the impact crypto assets are having on our global financial system,&#8221; said Farzam Ehsani, VALR CEO and co-founder</li>
 <li>VALR has processed over $7.5 billion in trading volume since its 2019 launch</li>
 </ul>
 
</div>



South African crypto exchange VALR raised a $50 million venture capital round in one of the largest fundraises for the continent on record.



The exchange raised $50 million — bringing the company’s valuation to $240 million — in a Series B round led by crypto asset manager Pantera Capital, VALR said Tuesday.



The round was oversubscribed with investors including Alameda Research, Cadenza, CMT Digital, Coinbase Ventures, Distributed Global, GSR, Third Prime and Avon Ventures, which is affiliated with Fidelity Investments. Existing investors Bittrex and 4Di Capital also wrote checks.



The funds will be used to expand across Africa and into other emerging markets like India, as well as bringing new products and services onboard and hiring.&nbsp;



In July 2020, VALR raised $3.4 million in a Series A. Its valuation has grown tenfold since.



“There is no longer any room for doubt regarding the impact crypto assets are having on our global financial system,&#8221; Farzam Ehsani, VALR CEO and co-founder, said in a statement.



VALR users can trade and custody more than 60 cryptocurrencies with relatively low fees. Since its 2019 launch, the startup has processed more than $7.5 billion in trades between 250,000 retail customers and 500 institutional clients.



Crypto has grown in Africa as funds have deployed capital to the continent. From July 2020 to June 2021, crypto adoption in Africa increased 1,200%, according to <a href="https://blog.chainalysis.com/reports/africas-grassroots-cryptocurrency-adoption/" target="_blank" rel="noreferrer noopener">Chainalysis</a>. Kenya, Nigeria, South Africa and Tanzania are considered regional crypto hubs.



“In addition to being the third-fastest growing cryptocurrency economy, Africa also has a bigger share of its overall transaction volume made up of retail-sized transfers than any other region at just over 7%, versus the global average of 5.5%,” the report says.&nbsp;



Last year, rapper Jay-Z and Jack Dorsey, current CEO of <a href="https://cms.blockworks.co/jack-dorseys-square-to-change-its-name-to-block/" target="_blank" rel="noreferrer noopener">Block</a>, formerly known as Square, created <a href="https://cms.blockworks.co/?s=africa#:~:text=Jack%20Dorsey%20and%20Jay%2DZ%20Created%20%E2%82%BFtrust%3B%20Here%E2%80%99s%20How%20its%20Board%20Plans%20to%20Deploy%20the%20500%20Bitcoins" target="_blank" rel="noreferrer noopener">₿trust</a>, a new endowment of 500 bitcoins for development across Africa and India. Three of the four ₿trust board members are in Nigeria, with one based in South Africa. 



&#8220;The world is on the precipice of huge financial change,” Ehsani said. “Crypto assets will become more and more pivotal to all our lives.”



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