The Central Bank of South Africa prefers to name cryptocurrencies as “cyber-tokens,” despite having no stated regulations or policies in place for cryptocurrencies.
As reported by Bloomberg, May 24th, Francois Groepe, South African Reserve Bank (SARB) Deputy Governor said in Pretoria “We don’t use the term ‘cryptocurrency’ because it doesn’t meet the requirements of money in the economic sense of the stable means of exchange, a unit of measure and a stable unit of value. We prefer to use the word ‘cyber-token.”
A Slow Start
In early April, the SARB has however put together a fintech team that will investigate cryptocurrencies with the aim of creating regulatory and legal frameworks from the findings. Groepe added, “We want to ensure or establish whether there is still compliance with the relevant financial surveillance or exchange-control regulations,”
The problem is that the SARB doesn’t presently regulate or supervise cryptocurrencies; though due to the ever-increasing interest in cryptocurrencies it is imperative that the matter is addressed sooner than later.
The timely investigative unit should bring to light a means to move forward without damaging the industry in South Africa, and according to the SARB’s banking practice director, Bridget King, the move has not come too late.
Finextra Reported her saying: “Regulating cryptocurrencies prematurely could have the negative consequence of throttling the growth and innovation of the industry… In addition, if laws are drafted based on existing technology, which is still in its growth phase, there is a risk that the technology may have moved so much by the time the legislation is enacted, that the legislation is obsolete or requires updating almost immediately to align with the latest technology.”
Industry growth hasn’t necessarily been completely thwarted in South Africa; a Cape Town-based company worth around $14.5 billion is expected to introduce a new cryptocurrency exchange in the country, though due the regulations being unclear, the new company will follow the frameworks set in place for platforms in New York.
Following the Investigation
It is not particularly clear as to why the SARB heavyweight made such comments prior to the findings of the research, though his statements echo that of the Bank of England Governor, Mark Carney, who in February made declarations that Bitcoin is unable to be considered a currency by any “traditional” standards.
The investigative unit ‘Project Khoka’ will be examining distributed ledger technology as a means to make secure electronic payments, to do so the bank is to launch a proof-of-concept using the Ethereum blockchain to test interbank clearing and settlements.
It is wise to approach any new system with caution, especially for financial institutions though there are many countries around that are many leagues ahead when it comes to the classification and regulation of cryptocurrencies.
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