Following many recent complaints from South African victims over crypto scams, the Financial Sector Conduct Authority (FSCA) has issued what it called a crypto health warning to South African Investors.
This warning comes few weeks after South African regulators called for tighter regulation of cryptocurrency trading, pointing out the recently reported “exit scam” of Mirror Trading International (MTI).
MTI, an alleged Ponzi scheme that claimed to be trading in Bitcoin derivatives, was accused of conducting illegal unregistered financial services business in October 2020 by the Financial Sector Conduct Authority (FSCA) of South Africa.
The platform has allegedly defrauded over 280, 000 members of over 23, 000 bitcoins.
Since no license is required to trade crypto, FSCA cannot yet ascertain if it was a Ponzi scheme and can only investigate and prosecute a case of trading without a license.
FSCA to tighten regulation for cryptocurrency trading
In a recent interview with Bloomberg, Brandom Topham, Head of Enforcement, Financial Sector Conduct Authority (FSCA), said the watchdog is making proposals to regulate the trading in cryptocurrencies in the country.
“At the point something becomes a Ponzi scheme, we have lost our jurisdiction. We need the police and the prosecuting authority to work fast and put people in jail.” He said.
Among the financial risks involved in investing in cryptocurrency as stated by the “crypto health warning” include crypto investment firms overstating potential payouts or understating the risks – lack of guarantee that crypto assets could be converted back to cash owing to demand and supply, crypto-asset prices being dictated by general public sentiments, and the high price volatility resulting in even greater risk for investors.
The Financial Sector Conduct Authority (FSCA) also didn’t fail to remind investors that crypto-related investments are currently not regulated; meaning that investors have no recourse against anyone should they get duped.
It seems, however, that the FSCA isn’t totally against investing in crypto and has cautioned investors to ensure that crypto assets only make up a small proportion of their investment portfolio, regardless of the level of risk they are willing to accept.
What are your thoughts regarding the FSCA’s recent warning? Do you think cryptocurrency prices are merely driven by public sentiment? Let us know in the comments.