Canada    FinTech Guide    Chapter 15    South Africa


15. Initial Coin Offerings (ICOs)
South Africa  South Africa

Because the market is currently so small and underdeveloped, no accurate report can be given on the existence of any climate towards ICO’s. The regulators seem open to working with issuers of ICO’s, which is evidenced by the willingness to work with the industry instead of banning them outright without reason and research.



Legal Affairs


Not at this stage. The South African Reserve Bank announced the establishment of a Fintech Program in February of 2018 to assess the emergence of Fintech and consider any regulatory implications. It does not make specific reference to ICO’s but is the closest that the SARB got to anything resembling distributed ledger technology which would underpin any ICO. Similarly, the South African Revenue Services is also looking at how to regulate these investments but no indication of how long this will take or any current regulation is available.

Restrictions: There are no explicit restrictions on ICO issuance, distribution or transfer. There is possible indirect regulation or restrictions, however, this is still to be confirmed or tested either via the courts or via the various regulators. Licence and costs There is no license required.

Token classification: Tokens or coins are not currently classified. Although that is true, if a payment of any sort conforms to the business of a bank or a deposit taking institutions as defined in the Banks Act it might bring it into scope of regulation. If there is a pooling of funds marketed to the public, it might conform to the definition of the operation of a Collective Investment Scheme as defined in the Collective Investment Scheme Control Act or fall within the ambit of the Financial Markets Act. This remains to be seen.

Prospectus: Because of the fact that ICOs are largely unregulated, no prospectus is required in general.

AML/KYC: Because, strictly speaking and ICO issuer is not regulated, it as also not an Accountable Institution as defined by the Financial Intelligence Centre Act. There are no requirements to speak of.

Further comments: Because, like cryptocurrencies, ICO’s are also not regulated currently, there is no protection for investors in these vehicles as has been confirmed by the South African Reserve Bank recently and in the past. However, working groups across various regulators are reviewing their policy standing on the matter. A regulatory risk exists that the unregulated environment will change soon, which brings protection to investors but extra costs to ICO issuers and other changes brought by regulation. Historically, South Africa has followed international regulation on financial services and one could say that the same would likely happen with the regulation of ICO’s once it becomes more regulated globally.



Contributing Authors

Garlicke & Bousfield Inc

Brian Jennings
Durban, South Africa

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Chapter Index:


1. Payment Services / Mobile Payment

2. Asset and Portfolio Management

3. Consulting and Broking Services / Robo-advisory / Auto-trading

4. Trading Platforms / Social Trading Platforms / Signal Following

5. Crowdfunding / Crowdinvesting / Crowdlending

6. Virtual Currency - Bitcoin

7. Loan Services / Factoring / Loan Broking / Finetrading

8. Online Banking Services

9. Analytics and Research / Data Management / Risk Management

10. Accounting

11. Identification

12. Online-pawning

13. InsurTech

14. RegTech

15. Initial Coin Offerings (ICOs)

Disclaimer:
The information in this guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: 1 May 2018