Regulating virtual currencies in South Africa

Abstract

In late 2008, a paper titled “Bitcoin: A peer-to-peer electronic cash system” was published by Satoshi Nakomoto. This paper introduced the global community to Bitcoin and by extension, to virtual currencies. The paper details the characteristics of Bitcoin, a virtual currency, and its linked enabling technology, named Blockchain. Since then, the popularity and use of virtual currencies has drastically increased. Virtual currencies are defined as “digital representation of value that can be digitally traded and function as a medium of exchange, a unit of account and/or a store of value but does not have legal tender status”. Much like the broader global community, virtual currencies are not viewed as legal tender in South Africa and as such are not subject to regulatory scrutiny. However, with this increased global popularity, central banks are awakening to the need to develop regulatory frameworks to deal with virtual currencies, to ensure the stability and integrity of financial markets. In this dissertation I will examine the current South African regulatory framework in relation to the issuing and supervision of legal tender and the broader financial services legal and regulatory framework. I will also consider international regulatory trends, in order to identify what regulatory enhancements could possibly be developed and implemented, to best regulate virtual currencies and financial technology.