A comparative appraisal of the regulation of cryptocurrency in South Africa

Abstract

In recent years, South Africa has faced several challenges, including rising unemployment and inflation. These economic pressures have led an increasing number of South Africans to explore alternative sources of income and investment opportunities. Among the most promising of these alternatives is cryptocurrency. Cryptocurrencies are decentralised virtual currencies that use blockchain technology to facilitate peer-to-peer transactions. They are created and managed through the internet using open-source applications within a peer-to-peer network. Due to their innovative nature, cryptocurrencies offer numerous advantages and have been hailed as one of the most significant financial innovations of the 21st century. However, cryptocurrencies are also associated with a range of risks and challenges, both for individual users and for the broader financial system. One of the primary concerns is the attraction of criminal activities, which has led to increasing calls for regulatory intervention. The collapse of FTX and other cryptocurrency enterprises in 2022 has further emphasised the urgent need for robust regulation to protect consumers within a highly volatile and decentralised financial ecosystem. As a result, there is a pressing need for comprehensive regulatory measures governing cryptocurrencies, both locally and internationally. If cryptocurrencies are to achieve widespread adoption, as current trends suggest, their regulation must be prioritised. Furthermore, the introduction of such regulation is expected to bring much-needed stability to an otherwise volatile industry, helping to mitigate the risks that cryptocurrencies pose to financial stability. This dissertation aims to provide a critical analysis of South Africa’s proposed approach to cryptocurrency regulation, with a comparative assessment of Singapore’s regulatory framework. Additionally, it seeks to clarify the nature and functionality of cryptocurrencies, along with their associated benefits and drawbacks. Finally, the study will evaluate whether South Africa’s regulatory stance is optimal and explore opportunities for improvement by drawing lessons from Singapore’s approach.