South Africa’s government is thoroughly aware of the technological developments in virtual or cryptocurrency and have already established an intergovernmental working group that will monitor it in cooperation with experts from the private sector with the aim of possibly regulating it.
This can be gleaned from the answers given by the Minister of Finance, Malusi Gigaba, in response to written questions submitted by adv Anton Alberts, chairperson of the FF Plus. (Please see the questions and answers attached).
The questions enquired about the government’s position with regard to the developing market for cryptocurrencies and whether it intends to regulate the market.
According to the Minister, an intergovernmental working group was established in December 2016 to consider possible policy formation concerning the various forms of fast-emerging financial technology (fintech), including cryptocurrency.
The Minister acknowledges that virtual currency is not regulated at present and the public is cautioned to be aware of the risks associated with the use of virtual currencies for transactions and
Adv Alberts says that it is important to strike a balance between innovation and the protection of consumers and investors.
He says that it is still early days for the phenomenon of fintech, which will have to go through a volatile developmental phase, similar to the internet in its early stage, but which will eventually reach a stable stage where the successful virtual currencies will coexist with fiat currencies.
“The underlying blockchain technology also has a lot of potential to be used for purposes other than creating cryptocurrency. Blockchain technology is a cheap, effective and increasingly safe way to do transactions as well as to transfer money from one person or institution to another.
“The FF Plus is also aware of Orania’s initiative to convert its money to virtual currency. This project could serve as a test run for the national use of virtual currency.
“Virtual currency and blockchain technology have the ability to decentralise the financial sector worldwide. It can either drastically change or put an end to banks and other financial institutions as we know them. The implication for governments is even greater, because the technology enables tax payers to receive their salaries and to trade using currencies that are presently not traceable or detectable in these new virtual economic systems.
“The implication for governments – in this case, the ANC government – is that legit new payment methods within virtual economic systems will develop very quickly and these will not be regulated by SARS. That means that most tax payers’ dream of not paying a single cent in tax to the corrupt ANC government may very well come true.
“The investigation that the ANC launched into the possible regulation of virtual currency will probably produce nothing more than powerless legislation, because no law will be able to govern the virtual system that is global and anonymous.
Therefore, if the technology does realise its potential, it will not only make banks superfluous, but it may also bring governments to a fall,” says adv Alberts.
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NATIONAL ASSEMBLY
QUESTION FOR WRITTEN REPLY
QUESTION NUMBER: 1984 [NW2196E]
DATE OF PUBLICATION: 23 JUNE 2017
1984. Adv A de W Alberts (FF Plus) to ask the Minister of Finance:
(a) What is the Government’s position with regard to the developing market for crypto currencies and (b) whether he intends to regulate the market?
NW2196E
REPLY:
The position on virtual or crypto-currencies is that they are currently not regulated (they operate without the authority of central banks). An alert to this effect was issued jointly by the National Treasury, the South African Reserve Bank (SARB), the Financial Services Board (FSB), the South African Revenue Service (SARS) and the Financial Intelligence Centre (FIC) on 18 September 2014 (attached Annexure A – available on www.treasury.gov.za), which cautioned members of the public to be aware of the risks associated with the use of virtual currencies for either transactions or investment. As noted, the relevant authorities continue to monitor and assess the use of virtual currencies and consult with private sector stakeholders in this regard. Further guidance or regulations may be issued, should the need arise.
While the above position still applies, the National Treasury together with the SARB, FIC, and FSB have also established an Intergovernmental Fintech Working Group in December 2016, to develop an approach and potential revised policy stance towards fintech, including crypto-currencies, and to deal with fast-emerging fintech matters in the financial sector, like crowdfunding, robo-advice, machine learning and alternate payment platforms. A balanced approach is being taken, which is supportive of the objectives of enhanced innovation, competition and financial inclusion in the financial sector, while also reviewing risks related to financial customer protection, money laundering and financial stability.
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