In recent years, Cryptocurrencies and Crypto Assets have gained significant attention and popularity. The Financial Sector Conduct Authority (FSCA) declared Crypto Assets to be financial products with immediate effect from 19 October 2022. The aforementioned means that anyone who provides financial services related to Crypto Assets will need to be appropriately licensed as a Financial Services Provider (FSP) and must apply to the FSCA for an FSP licence between 1 June 2023 and 30 November 2023.
Understanding the FSCA FAIS Notice 25 of 2023: Exemptions for Crypto Asset FSPs
To regulate the financial services provided in relation to Cryptocurrencies and Crypto Assets, the FSCA has issued FAIS Notice 25 of 2023, which will apply to all licenses Crypto Asset FSPs and took effect on the date of publication, i.e. 11 May 2023. This notice outlines certain exemptions for persons rendering financial services involving Crypto Assets. In this blog post, we will explain the key points contained in the Notice.
Exemption from General Code of Conduct and Regulatory Examinations
Crypto Asset FSPs, its Key Individuals and Representatives are exempted from maintaining suitable guarantees or professional indemnity or fidelity insurance cover, as is required in terms of section 13 of the General Code of Conduct and Board Notice 123 of 2009. This exemption applies solely to the rendering of financial services in relation to crypto assets.
Additionally, Crypto Asset FSPs and its Key Individuals are temporarily exempted from the regulatory examination requirements as captured in Part 5 of Chapter 3 of the Determination of Fit and Proper Requirements. This exemption lasts for a period of 18 months from the effective date of the notice.
Exemption for Crypto Asset Supervised Representatives
The notice also provides exemptions for Crypto Asset supervised Representatives, with different requirements based on their appointment status. If a supervised Representative was never appointed as a Representative of an FSP before the publication of this notice, they can be exempted from the Regulatory Examination requirements. However, the exemption is conditional upon the completion of the relevant regulatory examination within two years from their first appointment as a Representative for providing financial services in relation to Crypto Assets.
For those supervised Representatives who were previously appointed only to render financial services for Tier 2 financial products or perform sales execution, they must comply with the applicable regulatory examination requirements within two years from the date they were first appointed as representatives for providing financial services related to crypto assets.
Continuing Professional Development (CPD) Requirements
It is a requirement that Crypto Asset FSPs, its Key Individuals and Representatives complete a minimum of 6 (six) hours of CPD activities per CPD cycle specifically relating to crypto assets.
A Crypto Asset supervised Representative (including a supervised Representatives who were, before publication of this Notice, appointed only to render financial services for Tier 2 financial products or perform sales execution, and thereafter appointed as a representative to render financial services, other than the execution of sales, in relation to crypto assets) must also complete a minimum of 6 (six) hours of CPD activities relating to crypto assets per CPD cycle. The CPD cycle starts from the date when the supervised individual meets the applicable regulatory examination and qualification requirements for crypto assets, or after six years from their initial appointment as a crypto asset supervised representative, whichever occurs first.
It is essential for all parties involved, including Crypto Asset FSPs, its Key Individuals, Representatives and Crypto Asset supervised Representatives to comply with the conditions specified in the Notice. Failure to meet these conditions will automatically result in the exemption no longer being applicable to the respective individuals or entities.
FAIS Notice 25 of 2023 therefore provides exemptions for individuals and entities involved in rendering financial services related to crypto assets. These exemptions are subject to specific conditions, including compliance with regulatory examination requirements and fulfilling CPD activities. It is important for those operating within this sector to stay updated with any amendments or withdrawals of the exemptions that may be published by the FSCA.
Please also note that the new license application forms that now include Crypto FSP License Applications have now been published.
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by: Horizon Compliance team