2022 was not a good year for cryptocurrencies, but at least South African consumers got some protection from crypto scams like Mirror Trading International ( MTI). a financial product within the meaning of the Financial Advice and Mediation Act. Bitcoin started the year with a significant drop in value, which continued from $47,733 on New Year’s Day and fell to its lowest point of $15,757 in November. Its value stood at $64,400 in November 2021 before falling almost 20%. In 2022, Bitcoin lost…
2022 was not a good year for cryptocurrencies, but at least South African consumers got some protection from crypto scams like Mirror Trading International ( MTI). a financial product within the meaning of the Financial Advice and Mediation Act.
Bitcoin started the year with a significant drop in value, which continued from $47,733 on New Year’s Day and fell to its lowest point of $15,757 in November. Its value stood at $64,400 in November 2021 before falling almost 20%. In 2022, Bitcoin lost about 67% of its value.
Other cryptocurrencies didn’t fare as well in 2022, with stablecoin TerraUSD and its sister token Luna collapsing after an alleged attack on Terra’s algorithm triggered a domino effect that caused Luna’s price to fall and the entire system to implode.
This was not the end of cryptocurrency troubles, however, as Alameda Research and FTX, founded by Sam Bankman-Fried, went bankrupt. Bankman-Fried was arrested for cheating on his clients.
ALSO READ: Mirror Trading International Liquidators Demand R4.6 Billion From 18 Masterminds
MTI crypto investors are still waiting
Meanwhile, South African investors in MTI are still waiting for news about their money. Johann Steynberg launched MTI as an automated bitcoin trading platform in April 2019, and investors were required to deposit a mandatory minimum amount of bitcoin into MTI’s wallet, which MTI says is growing at 0.5% to 1.5% per day using a “trading bot.” would.
Investors could get even higher returns by referring other investors and investing thousands of people in MTI, but the system began to collapse when the FSCA began investigating the system. The company was provisionally liquidated at the end of 2020 and finally liquidated on June 30, 2021.
The liquidators applied in March this year to have MTI illegal to force winners to return any winnings they made, but some members are blocking this to ensure they don’t have to return their “winnings”.
In May of this year, MTI’s joint liquidators initiated court proceedings to seek R4,666,077,528 from 18 masterminds involved in what has been described as the biggest scam of all time. The liquidators will use the money to pay off MTI’s debts to its creditors.
ALSO READ: Consumers Finally Have Some Protection Against Malicious Cryptocurrencies
consumer protection
The FSCA declared crypto assets a financial product under the Financial Advisory and Intermediary Services Act in October, effective immediately.
According to a statement published in the government gazette“Crypto-Asset” means a digital representation of value that is not issued by a central bank but can be traded, transferred or stored electronically for payment, investment or other purposes, employs cryptographic techniques and uses distributed ledger technology.
Experts have been calling for crypto assets to be regulated since people can invest in them. Declaring crypto as a financial product now also includes crypto asset service providers as accountable institutions under Schedule 1 of the Financial Intelligence Center Act (FICA).
Therefore, a person providing FAIS advice in relation to crypto assets must now also be licensed as a FAIS financial services provider and meet the relevant requirements of both FAIS and FICA, including the required reporting requirements, to ensure proper monitoring, reporting and oversight by the FSCA and FIC of all crypto asset transactions, according to the Crypto Assets Regulatory Working Group.
The main reason for the classification of cryptoassets as a financial product under FAIS and the inherent oversight of these products by the relevant regulators is to protect consumers participating in the cryptoassets market. Many consumers have been victims of crypto scams and scandals in recent years.
ALSO READ: If you hate reading, investing in crypto might not be for you
Problems with crypto assets
The working group identified several issues with crypto assets that:
- Are a form of fintech innovation that can impact the country’s financial sector
- Act within a regulatory gap as a globally harmonized approach or position has not yet been achieved
- Can create conditions for regulatory arbitrage while introducing risk
- Can become systemic as interest, investment and ownership in crypto assets continues to grow.
The risks identified by the working group are the establishment of a parallel, fragmented, non-sovereign monetary system, consumer protection, market efficiency and integrity risks, an undefined legal and regulatory framework, and money laundering and terrorist financing, exchange control and market conduct risks, and operational risks, including cybersecurity risks.
Using crypto-assets to pay for goods and services could also create the risk of parallel, unregulated and fragmented payment systems, a reduction in the efficiency of the national payment system, perceived regulatory acceptability and operational risk, and a lack of consumer protection for crypto-asset payments.