Is the investment worth the risk?

In January 2021, the Financial Sector Conduct Authority (FSCA) issued a draft declaration intended to give partial effect to some of the recommendations contained in the 2020 Position Paper by declaring crypto-assets a financial product under the FAIS Act. 

The declaration would affect that any person furnishing advice or rendering intermediary services concerning crypto-assets must be authorised under the FAIS Act as a financial services provider. It must comply with the FAIS Act's requirements. This will include crypto-asset exchanges and platforms, as well as brokers and advisors

The FSCA stopped short of confirming that this declaration, in no way, implies the regulation, legitimisation of crypto-assets, but rather is intended to provide some protection to investors.

What??

Let me try to understand this. The FSCA says that no protection can be provided as the FSCA can only regulate those registered with the authority if I invest through an unregulated entity. 

But if the FSCA is not regulating or legitimising crypto-assets, what are they protecting?

I have managed to piece together, from visiting various websites, reading articles, and asking industry players: the regulation of crypto-assets has been under consideration by the National Treasury (NT) and relevant authorities for several years.

In 2020, I was told that the Crypto-assets Regulatory Working Group (CAR WG) issued a Position Paper with recommendations relating to crypto-assets regulation.

As I see it, we are sitting with a draft declaration that serves no real purpose. Until such time that there are an alignment and decisive shift from position papers to definitive guidelines and or regulations, my protection as an investor remains in question!

Time waits for no one – not even a regulator. Our world is very different in many ways from what it was when the Crypto-assets Regulatory Working Group (CAR WG) issued their Position Paper.

The lengthy 33-page document makes no mention of a global crisis spurred by a plague-like pandemic, which would alter our world in a way few could have imagined. I cannot put the blame squarely on the shoulders of the CAR WG members, many of whom I know personally and have the utmost respect for the industry experience and knowledge.

The point is the crypto asset market is a rapidly evolving market, irrespective of the pandemic, and the question I ask: Is it time we took measure to protect our interests? 

For even the biggest sceptics out there, it would be hard to resist the lure of Bitcoin.

At a price of around R70,000.00 in April 2019 and sitting just a shade over R820,000.00 today -what an incredible return – especially in the challenging financial environment many of us currently find ourselves in.

It is not surprising that the surge in the price of bitcoin has resulted in a renewed interest and interest from highly respected and reputable quarters.

With well-known names such as Goldman Sachs, Morgan Stanley, who dismissed digital currencies for many years, are warming to the idea.

Offering investment vehicles for Bitcoin and other digital assets to private wealth clients by Goldman Sachs and Morgan Stanley's plans to give wealthy clients access to three funds that will enable them to own crypto assets, the race to retain and grow their respective private client base is on.

On the backend, Bank of New York Mellon Corp is developing a platform for traditional and digital assets. 

The problem is that, as creatures of habit, we are lured by the prospect of high returns rather than understanding what we are investing in.

Crypto scams are popping up everywhere. This despite repeated warnings from the authorities – which seem to be falling on deaf ears. 

The same rules apply to Bitcoin as to any other investment. Bitcoin and other Crypto assets are high-risk, long-term investment. 

While there is no regulation in place, you have no recourse.

The question remain. Is the investment worth the risk?