Regulation of the cryptocurrency in South Africa towards a legal framework

Abstract

The internet has over the years created a platform for endless possibilities. Trade in goods and service is one area that has been enabled by a mere click of a computer’s mouse. This technological revolution allows clients and businesses to connect and undertake efficient and safe business transactions. This revolution has also brought to the forefront the shortfalls of the current international trading structure to acclimatise to these latest technological advancements. Cryptocurrency is one such new phenomenon that has created challenges for legal systems and international trade with regard to predictability, legal certainty, security and confidentiality. The cybernetic and decentralised nature of blockchain technology and the absence of effective regulation makes the application of traditional legal frameworks unsustainable and the enforcement of any new legal mechanisms tedious. As a result of the above explanations, the current regulatory status of cryptocurrencies is vexatious. However, cryptocurrency platforms offer a solution to international trade issues as cryptocurrencies can transcend borders and are international by character. Furthermore, the anonymity nature of cryptocurrencies can surpass the current trade restrictions and allow for virtually instantaneous and cheaper cross border transactions, therefore making it more effective than the traditional fiat systems. However, there are associated risks as the cryptocurrency platforms can be used by criminal networks for nefarious purposes. Because of that, some jurisdictions around the globe have made headways in the regulation of cryptocurrencies and have put into place institutional and legislative frameworks. However, a unitary approach to the regulation of cryptocurrencies in international trade is well overdue as individual governments have adopted differing approaches in their efforts to regulate virtual currencies. This study explores the legal nature of cryptocurrencies in international trade, particularly in the international electronic commerce economy. The study will endeavour to determine whether international harmonisation of efforts by the major international regulatory organisations can develop a universal blueprint to harness the potential benefits of blockchain and cryptocurrency. It will be discovered that there is an urgent need for a regulatory intervention in South Africa. Premised on this need, the study makes recommendations such as the integration of cryptocurrencies into the existing legislative framework as well as the creation of a stand-alone statute to specifically regulate it. The creation of a cryptocurrency ombudsman should also be considered as an element of regulatory intervention.