Regulation of cryptocurrencies in South Africa

Abstract

Recent years have seen the emergence of new types of virtual “currencies” which are traded on digital platforms as payment for goods and services. Although referred to as “currencies” these crypto currencies are not recognised as legal tender and are thus more appropriately referred to as “crypto assets”. Regulators across the globe have been considering the past couple of years whether crypto currencies require to be regulated and if so, what the most appropriate approach to the regulation of crypto currencies would be. Although crypto currency is a disruptive new technology that can potentially yield many benefits in opening up access to financial services for the unbanked, it also may give rise to various risks which have resulted in many countries taking steps to put in place measures for their regulation. In particular crypto currencies may create risks in the context of money laundering and tax evasion and if not appropriately regulated, it may also compromise the protection of consumers who wish to invest in crypto currency. Singapore has been a leading jurisdiction in the context of regulation of crypto currency. Although its main regulatory focus is on combatting risk relating to money laundering and terrorist financing through the use of virtual currency it has also put some measures in place to protect consumers who wish to invest in crypto currency. More recently South Africa, where the central bank initially took the view that it would not regulate crypto currency, has also taken various measures to develop a proposed framework for the regulation of crypto currency which covers various risks associated with these disruptive innovations which nevertheless also have various benefits that should be taken into account so as not to stifle necessary financial innovation. This dissertation seeks to interrogate the nature of crypto currency, their advantages and disadvantages and recent developments in South Africa on the regulation of crypto currency. The focus is on the protection proposed to be afforded to persons who wish to invest in crypto currency. Developments in the context of regulating crypto currency and affording some measure of consumer protection in Singapore is interrogated for comparative purposes.