“The National Treasury, the South African Reserve Bank, the Financial Services Board, the South African Revenue Service and the Financial Intelligence Centre, published a document titled “User Alert – Monitoring of virtual currencies”.
The purpose is to make the public aware of the risks associated with the use of virtual currencies for either transactions or investments.
Virtual currencies are becoming increasingly popular among users to purchase goods and services, to transfer to another person, for personal use or to hold as an investment. While there are benefits associated with this new technology, it is difficult to assess those benefits against the risks of something so novel, innovative and technologically sophisticated. Users of virtual currencies can therefore become susceptible to fraudulent or any other criminal behaviour as they may be less circumspect than usual when faced with the promise of high-return investment opportunities.
Accordingly, we strongly advise users to consider the concomitant risks when evaluating undertakings involving virtual currencies. The relevant authorities will 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.
The article discusses virtual currencies under the following headings.
- What are virtual currencies and how do they work?
- Virtual currencies are unregulated in South Africa
- Risks and challenges users should be aware of:
- There is no investor protection and no recourse
- Virtual platforms are prone to operational risks
- Virtual currencies are susceptible to misuse
Despite the fact that this document was published in 2014, most of the information is still valid, including the fact that it is unregulated.
You can click here to download a copy to share with your clients.