In a lengthy article in the South African online newspaper Tweb, Rabelani Dagada, a professor in the Faculty of Engineering at the University of Johannesburg, advised the Parliament of South Africa to adopt regulations for cryptocurrencies, as they represent a technological revolution that can no longer be stopped, in the same way as the industrial revolution in 19th century Britain.
Urging the country to open up to cryptocurrencies
The professor writes:
“Technology has prevailed against violent and regulatory opposition. During the era of the industrial revolution, some workers in Britain rioted against mechanised manufacturing firms. Blue-collar workers waged a war against technology. They physically destroyed production machinery, cotton and woollen mills”.
Dagada refers to the great opportunity missed by the South African Stock Exchange to give the green light, in 2018, to the listing of the first Bitcoin ETF, which would have made it a real hub for cryptocurrencies and digital innovation, considering that the country already has highly sophisticated and innovative financial services, compared to other developing economies.
The professor cites as an example the Luno exchange, which has quickly become one of the world’s leading cryptocurrency trading platforms. In defence of the adoption of cryptocurrency regulation, the professor also points to the possibility of the state being able to have a significant revenue from the taxation of cryptocurrencies.
The professor writes in conclusion:
“It’s clear that if SA wants to be a crypto-currency hub, its policy-makers and regulators should finalise the crypto-currency public policy”,
South Africa, cryptocurrencies and crime
The relationship between the South African authorities and cryptocurrencies has been rather controversial for a long time, made of steps forward towards its regulation and liberalization which alternated with resounding backtracks.
Such as when in August, Lesetja Kganyago, the President of the Central Bank of South Africa, said that cryptocurrencies like Bitcoin are not currencies because of their failure to meet the three key standards required.
Kganyago said at a press conference:
“First, it should be an acceptable medium of exchange. Second, it should be accepted as a store of value. And third, it must be a unit of account. A cryptocurrency is a store of value. It is a medium of exchange but is not generally accepted. It’s only accepted by those who are participating in it”,
The country has long allowed the trading of cryptocurrencies on major exchanges and has legislated on the taxation of digital assets, in response to a growing interest in the crypto world.
In 2021, the daily value of cryptocurrency trades exceeded $150 million. However, cryptocurrency-related criminal incidents are also on the rise, such as the discovery of the world’s largest cryptocurrency Ponzi scheme in 2020, when around $580 million in Bitcoin was stolen from unsuspecting investors.
South Africa also saw the largest hacking incident in 2021, when a mysterious company, Africrypt, managed to steal $3.8 billion from the accounts of hundreds of investors.
Stricter laws to regulate crypto
In an attempt to curb these phenomena, the South African financial authorities are accelerating towards the approval of a strict regulation of cryptocurrencies that could be ready by the end of the year.
Kuben Naidoo, CEO of the Prudential Authority, which regulates the country’s banks and insurance companies, told Bloomberg in June:
“We are of the view that cryptocurrencies are risky and we want to ensure that the financial sector is aware of those risks and pricing for those risks properly”.
According to initial rumours, this new regulation should, among other things, allow financial authorities to better monitor cryptocurrency-related activities, including daily trading, customer base, service providers and trading volume.
It seems to be established by now that for the time being, digital currencies will neither remain legal tender nor be recognized as electronic money.