SA Regulator Digs into Decentralised Finance Challenges

The Financial Sector Conduct Authority (FSCA) is facing challenges in regulating decentralised finance (DeFi), which requires a rethink on how financial activity is supervised and governed.

South Africa has licensed over 300 crypto asset service providers, but DeFi's rapid growth is creating new regulatory challenges for the FSCA.

The regulator established a functioning supervisory perimeter for centralised crypto actors, but DeFi fundamentally challenges traditional financial regulation by allowing distributed networks and self-executing computer code to perform intermediary functions.

Unathi Kamlana, commissioner of the FSCA, said that while smart contracts can't pause to determine suspicious transactions or consumer vulnerability, regulators should focus on what a protocol actually does rather than its technology or legal structure.