The regulation of cryptocurrencies in the context of South Africa’s financial sector.

Abstract

Getting a global society to agree something has value and can be used as a currency without government support and without a physical form is one of the most significant accomplishments in monetary history. 1 This research critically analyses a significant yet, uncertain area of law in South Africa -the regulation of cryptocurrencies.Cryptocurrencies are digital representations of value supported by cryptography and function within a global computerised ledger system called the blockchain.Cryptocurrencies are multifaceted with its use extending beyond an alternative payment method.Cryptocurrencies are not issued nor controlled by a central regulatory authority, hence, they are not considered to be legal tender in South Africa.Currently, as at September 2019, cryptocurrencies are not directly regulated in South Africa.South African financial regulators, particularly the South African Reserve Bank and the South African National Treasury caution users about the risks associated with cryptocurrencies and vigorously indicate that citizens have no recourse to South African authorities.On the other 'Any or all activities related to the acquisition, trading or use of virtual currencies, 6 particularly [cryptocurrencies] are at the end-user's sole and independent risk and have no recourse to the bank.' 7 2 Financial technology is defined by Price Water House Cooper as a dynamic segment at the intersection of the financial services and technology sectors where technology focused start-ups and new market entrants innovate products and services currently provided by the traditional financial services industry.It is financial innovation intertwined with legal technology to change the way finance is conducted, often as a disruptive technology.Disruptive innovation refers to the creation of new markets and value networks that eventually disrupt the existing markets and value networks, displacing established market leaders and alliances.Many financial innovations are thought of as disruptive because they usher in new products, new ways of effecting transactions and intermediation, new institutions and organisational forms that may permanently change the landscape of finance.