Analysing the impact of cryptocurrencies on banking regulations : assessing opportunities and Challenges

Abstract

Cryptocurrencies are a recent phenomenon that has taken the world by storm and has created overnight millionaires. However, with any emerging technology, comes opportunities, along with challenges. Finding an effective form of regulation to monitor cryptocurrencies and minimise the challenges while capitalising on opportunities, has proven onerous. In terms of banking regulations in South Africa, cryptocurrencies are unregulated and while they remain unregulated, they give rise to a number of threats to banking institutions, such as money laundering and financial terrorism. On a more positive note, cryptocurrencies provide banks with a number of advantages, such as lower transaction costs, quicker transactions times and increased security. Banking legislation such as the Banks Act 94 of 1990, Financial Intelligence Centre Act 38 of 2001, National Credit Act 34 of 2005, National Payment System Act 78 of 1998 and South African Reserve Bank Act 90 of 1989 are silent on how banking institutions are meant to handle and transact with cryptocurrencies. Different role-players in South African banking institution such as the Financial Action Task Force, Financial Intelligence Centre, Financial Sector Conduct Authority, Intergovernmental Fintech Working Group, South African Reserve Bank and South African Revenue Services all have their own stance of how cryptocurrencies should be defined and approached, however, all their approaches are different and causing confusion in South Africa. Mauritius enacted the Virtual Asset and Initial Token Offering Services Act in 2021 which has proven helpful in Mauritius. Thus, lessons could be drawn by South African regulators in order to maximise the benefits of cryptocurrencies, while minimising the risks.