The regulation of virtual currency in South Africa

Abstract

The new technologies has proliferated the global economy at a fast pace and proved to be a compelling alternatives to traditional methods of payment. A vital technological development in this process has been the emergence of virtual currencies (VCs). VC schemes are distributed, open-source, math-based peer-to-peer virtual currencies without a central administrating authority, monitoring and oversight authority. VCs has revolutionised the traditional payment methods. VCs offer many potential benefits, including costs, speed of settlement, global reach, and anonymity of the payer over their traditional payment counterparts. At the same time, it is these same benefits which pose as a source of risk to the integrity of the financial system. VCs are potential vehicles for money laundering, terrorist financing, tax evasion, fraud and other illicit activities. Risks to financial stability may eventually materialise as the use of VCs become more widespread. Given their novelty, the developing of effective regulatory responses is still in early stages globally. VCs exists in a heavily regulated environment and as a result regulators have been forced to address these challenges. Responses have included banning VCs totally, issuing warnings to consumers and clarifying the applicability of existing legislation to VCs. South Africa has not been insulted in mining for an effective regulatory responses. . In South Africa the SARB and National Treasury released position papers that cautions consumers on the risks of VCs. This dissertation considers the possible regulatory approach which may be adopted by the regulators in South Africa. Investigation the right type of regulations suitable in South Africa requires a comparative analysis with other international jurisdictions.