South Africa's Crypto Regulators Confront Decentralized Finance Challenge

South Africa's crypto regulations are struggling to keep pace with the rapid growth of decentralized finance (DeFi). According to Unathi Kamlana, commissioner of the Financial Sector Conduct Authority (FSCA), DeFi requires regulators to rethink how financial activity is supervised and governed.

The FSCA has licensed over 300 crypto asset service providers (CASPs) since establishing a licensing framework for CASPs at scale. This has taken place alongside the growth of the crypto asset ecosystem, with an estimated 7.8 million South Africans now owning or trading crypto assets.

However, Kamlana warned that traditional financial regulation is being challenged by DeFi protocols, which can execute transactions according to their programming without human intervention. He noted that smart contracts cannot pause to determine whether a transaction appears suspicious or if a consumer is vulnerable.

Kamlana argued that regulators should identify individuals or groups exercising effective control over DeFi protocols and attach corresponding regulatory responsibilities to them.