Getting Smart with Crypto: What every South African consumer should know
In recent years, crypto assets have transformed the way we think about money and the way we pay for goods and services. But what are they, really? Crypto assets are defined as a digital representation of value that is not issued by a central bank, but is capable of being traded, transferred or stored electronically by natural and legal persons for the purpose of payment, investment, simply put its digital money Crypto assets use special coding to keep transactions secure and private. They also use a shared online record, called a blockchain, where all transactions are stored safely and can’t be changed easily.
The most common crypto assets include Bitcoin and Ethereum. Bitcoin is often called ‘digital gold’ because people invest in it and hold it as a way to keep their money safe over time, like a digital savings account. Ethereum is different; it’s used not only as money but also to create things like digital contracts and applications that don’t rely on a central authority. For example, Uniswap is a decentralized application on Ethereum that allows people to trade cryptocurrencies directly with each other, without needing a traditional exchange or middleman.
With all the hype, there are also risks
Crypto assets are known for their high-risk, high-reward potential. Prices can fluctuate dramatically in a short period, leading to substantial gains or losses for investors. This volatility is largely due to crypto’s decentralized nature - without a central authority, prices are driven by user demand, speculation, and global trends.
Crypto assets have been a target for scams long before the Financial Sector Conduct Authority (FSCA) recognized them as a financial product in 2022. However, as crypto’s popularity has grown, scam activities have also continued to increase. To protect consumers, the FSCA has taken steps by licensing Crypto Asset Service Providers (CASPs) and holding them accountable for the financial advice and services they provide related to crypto assets. As of December 2024, the FSCA had licensed 248 CASPs, helping to ensure that consumers are dealing with regulated providers.
Understanding the Risks
While the regulation by the FSCA is a positive step, it’s crucial for consumers to remain vigilant and knowledgeable about the potential risks associated with crypto investments and the prevalence of scams underscores the importance of consumer vigilance. A study by Kaspersky revealed that more than half of users in South Africa have been affected by crypto-related cybercrime, while only 24% felt well-informed about potential cryptocurrency threats. This highlights the need for continuous education and awareness to protect consumers in the evolving crypto landscape.
By educating yourself about how crypto works, the benefits, and the associated risks, you can make informed decisions in this dynamic market. Remember, informed consumers are empowered consumers!
Progress by the FSCA: Building a Safer Crypto Market
To safeguard South African consumers, the FSCA launched licensing for Crypto Asset Service Providers (CASPs) in June 2023. By November 2023, existing providers offering crypto-related financial services were required to submit their license applications. As of July 2024, the FSCA has licensed 138 CASPs, a crucial step in bringing more transparency and oversight to the market. Despite regulatory measures, crypto scams continue to pose significant threats. Scammers are constantly evolving their tactics, targeting both new and experienced investors alike. To keep the public informed, the FSCA has been vigilant in warning against unlicensed operators. For a comprehensive understanding of the crypto market and associated risks, refer to the FSCA’s Crypto Market Study
Spotting a Crypto Scam: 5 Red Flags to Watch Out For
While the FSCA is working to protect consumers, it’s essential to recognize the warning signs of a scam. Here are the major red flags to look out for:
1.Fake Websites:
Scammers create websites that mimic legitimate platforms to trick users into sharing sensitive information.
2.Too-Good-to-Be-True Returns:
High returns with “guarantees” of big profits are often bait. Real investments come with risks, so be cautious of unrealistic promises.
3.Demands for Additional Deposits:
Scammers may ask for extra money before “allowing” you to withdraw. Legitimate platforms do not operate this way.
4.Claims That No Knowledge or Experience is Needed:
Any service that tells you there’s no need for knowledge or guidance in trading is likely a scam.
5.Celebrity Endorsements:
Ads featuring celebrities are often designed to build trust, but don’t assume legitimacy without verifying their involvement.
What to Do if You Think You’ve Been Targeted
If you or someone you know may be a victim of a crypto scam, contact the Financial Advisory and Intermediary Services (FAIS) Ombudsman for assistance with complaints against registered financial services providers:
- Website:
FAIS Ombudsman Complaints Portal
- Email:
info@faisombud.co.za
- Client Care Centre:
(012) 762 5000 or Sharecall 086 066 3274
South African consumers are encouraged to be cautious and proactive. Use the resources and protections provided by the FSCA to help make informed choices about crypto. For more information or if you suspect you’re dealing with an unauthorized provider, call the FSCA Consumer Help Centre at 0800 20 3722.
By understanding the risks and leveraging the FSCA’s resources, you can feel empowered and educated in your crypto journey. Remember, informed decisions are safer decisions. Let’s keep South Africa vigilant, safe, and ahead of the curve in crypto investing!
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