Crypto exchange OVEX was recently awarded a Digital Asset Service Provider (DASP) licence by French financial regulators, the Autorité des Marchés Financiers (AMF) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR ) – a key step in its plan to become a major player in the European market.
“OVEX receiving DASP registration from a major EU regulator is an important vote of confidence and is a testament to our credibility and trustworthiness as a player in this space,” says Tatenda Nhemachena, OVEX’s chief legal and compliance officer.
This is a crucial milestone for the Cape Town-based exchange as it readies for European-wide regulation, known as Markets in Crypto-Assets Regulation (MiCA), expected to be introduced in 2024.
“The DASP licence allows us to provide custody of digital assets and engage in the crypto exchange business. In other words, we can offer our French clients crypto-to-crypto trading, as well as a fiat-to-crypto onramp, and a crypto-to-fiat offramp. This is our entry point to the massive European market, and we are positioned now to transition to MiCA regulations covering the entirety of Europe when they are introduced next year,” adds Nhemachena.
The MiCA regulations propose a ‘passporting’ system that would allow licence holders to operate across all European countries.
OVEX already has a Category 1 licence from the Financial Sector Conduct Authority (FSCA) in SA and is authorised by the SA Reserve Bank (Sarb) to deal in forex for offshore payments and remittances. It is also licensed in Dubai with the Virtual Assets Regulatory Authority, as well as with the Australian Transaction Reports and Analysis Centre, and is applying for licences in several other jurisdictions, including a Crypto Asset Service Provider licence in SA.
Licensing is an essential step in ridding the industry of bad actors that have kept institutional and high-net-worth investors away from the space, says Nhemachena.
OVEX is best known for its over-the-counter (OTC) desk that allows customers to purchase large crypto volumes at a single price. That’s much harder to do through normal retail exchanges where large volumes are broken up into smaller deals that are executed at different prices and often over a period of hours or even days.
The European expansion follows an aggressive push into Africa, where OVEX operates an OTC desk and exchange in the following countries: Botswana, Cameroon, DRC, Ghana, Kenya, Nigeria, Senegal, Tanzania and Zambia.
MiCA regulations in Europe will set the tone for the rest of the world and will apply to companies offering custodial wallets, crypto exchanges and trading platforms, crypto portfolio managers and crypto asset advisors.
The European regulations provide a clear distinction between cryptocurrencies and tokens. Issuers of crypto assets will be subject to strict transparency requirements and will have to comply with anti-money laundering rules while undertaking continuity of services and rigorous data security obligations. MiCA will bring an end to anonymous token issues, which have been a scourge of the industry for several years. Asset-backed stablecoins will be tightly monitored, along with asset reserve requirements and complaints handling procedures to prevent market abuse and insider trading.
As a DASP-regulated entity, OVEX already complies with most of the proposed MiCA requirements.
“We invested a lot of time and money to ensure we satisfy the regulators’ requirements wherever we operate in the world,” adds Nhemachena.
DASP requirements for crypto custody
These are some of the requirements for a DASP licence:
- A clearly defined customer policy about custody of digital assets;
- An obligation to return digital assets or provide ways for customers to access digital assets (when the crypto-custodian is held responsible);
- Segregation of custodian and client digital assets;
- Client consent explicitly required to access and utilise digital assets;
- Strict record-keeping of digital assets holdings and movements;
- Notary sign-off is required to ensure the quantity of digital assets held on behalf of users is equal to the quantity of digital assets recorded in the position registers; and
- Providing periodic information to clients.
DASP requirements for a crypto-fiat and crypto-crypto service provider
There are equally robust requirements under DASP licensing for crypto-to-crypto trading and crypto-fiat onramps and offramps:
- Licence holders must adhere to a non-discriminatory commercial policy;
- They must publish firm prices or clearly explain the pricing method for digital assets;
- They must offer clients post-trade transparency (quotes and volumes);
- Orders must be executed at the quoted prices at the time the order is received; and
- Exchanges must offer the best execution.
How does the DASP licence benefit SA clients?
“This will benefit clients in SA as the licence enhances OVEX’s credibility globally ensuring that customers are dealing with a well-regulated exchange that follows best practices,” says Nhemachena.
Brought to you by OVEX.
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