Cryptocurrencies will be regarded as financial items in SA.

The classification of bitcoin assets as financial commodities in South Africa will make it easier for regulators to monitor the market and support consumer protection.

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The Financial Sector Conduct Authority referred to cryptocurrency assets as “a digital representation of value” in a gazette notification published on Wednesday. The release claims that a cryptocurrency asset can be electronically exchanged, transferred, or held for use as a medium of exchange, a means of investment, or for other purposes without being created by a central bank.

The announcement is the first legal step required to put the crypto-asset market under South African law, according to Brent Peterson, head of law at cryptocurrency exchange Easy Crypto.

The declaration, which takes effect immediately, coincides with efforts being made by governments throughout the world to regulate cryptocurrencies in order to protect users from hazardous virtual currencies and con artists. US lawmakers and officials are searching for ways to limit how stablecoins are used.

The licensing requirements that will result from this classification, according to Marius Reitz, general manager for Africa at cryptocurrency platform Luno, “will drive high standards in the industry, particularly in relation to consumer protection, with potential investors being able to easily identify those providers that satisfy regulatory requirements.” Another significant benefit is that financial advisors can formally advise clients on bitcoin investments.

By 2020, 15% of South Africans, according to Global Web Index, will be Bitcoin owners. The young industry has already experienced failures, such as Mirror Trading International's demise last year, which led to losses of almost $1.2 billion. The South African Reserve Bank has been working with international regulators to recognize the coins as financial instruments, making it easier to monitor the coins for money laundering and terrorism funding.

According to Hannes Wessels, head of operations for Binance South Africa, this move will promote clarity, user protection, and much-needed ecosystem confidence.