Cryptocurrency – the wild west or a carefully regulated environment?


What is the legal framework in South Africa for cryptocurrency? 

Bitcoin, Litecoin, Ethereum, Monero…what do they all have in common? They are all cryptocurrencies. You’ve probably heard of Bitcoin. Many people think Bitcoin and cryptocurrency are the same thing, but in fact Bitcoin is just one type of cryptocurrency. Cryptocurrency is a digital payment system that works outside of the banking system. It’s a peer-to-peer payment system that allows anyone anywhere to send and receive payments. Cryptocurrency payments are digital entries on an online database. Cryptocurrency is stored in a digital wallet and when you make a cryptocurrency payment, the transaction is recorded in a public ledger. Bitcoin was introduced in 2009 by an anonymous developer and it has since become the most well-known cryptocurrency in the world. It has inspired the development of other cryptocurrencies, such as the ones named above. 

As cryptocurrency gains popularity, it becomes harder and harder for countries to keep up from a regulatory perspective, particularly as the digital world knows no territorial or legislative boundaries. Because cryptocurrency operates outside of the traditional banking environment, and is highly encrypted (hence the name), it has become the favourite of cybercriminals. Ransomware attackers demand payment – often millions of dollars – in cryptocurrency. Cryptocurrency has a tainted reputation as a result, but there is nothing inherently illegal or bad about cryptocurrency. Therefore South Africa has fixed its sights on providing legal structuring mechanisms to make the grey areas of cryptocurrency regulation more black and white. 

South African Reserve Bank 

Recent investigations conducted by the South African Reserve Bank (SARB) have demonstrated how easily cryptocurrency can become decentralised. The investigation highlighted non-compliance with existing regulations, leading to tax evasion, money laundering and terrorist financing activities. 

SARB’s solution is to regulate cryptocurrency not as a currency, but rather as a financial asset. Legitimising the industry in this way will enable the asset’s compliance with anti-money laundering legislation and exchange control regulations, among others.

Position paper on crypto assets

On 11 June 2021, the Intergovernmental Fintech Working Group (IFWG) confirmed that crypto assets will be brought into the SA regulatory review. The published position paper on crypto assets provided three pillars of regulation:

  • Implementation of an anti-money laundering (AML) and counter-terrorism financing framework
  • Framework for monitoring cross-border financial flows
  • Application of financial sector laws

Regulatory framework 

The regulation of cryptocurrency will follow a phased approach. The first phase began in October 2022. The South Africa Financial Sector Conduct Authority (FSCA) declared that, effective 19 October 2022, crypto assets are considered financial products. 

This means that crypto assets are subject to FSCA regulation in terms of section 1(h) of the Financial Advisory and Intermediary Services Act (FAIS) Act. Individuals who provide advice or intermediary services related to crypto assets must be authorised as a financial services provider or as a representative of such a provider. 

The Conduct of the Financial Institutions Act (COFI) Bill will now include certain crypto-asset services as a licensing activity and define them as “financial services” in the Financial Sector Regulation Act, 2017. Applications for a licence must be submitted before 30 November 2023. 

Along with the latest declaration, an FSCA policy document was released containing explanatory notes, transitional details and plans for a crypto-asset regulatory and licensing framework.

The regulatory framework is continually evolving and the policy document was accompanied by a draft general exemption. Commentary is invited on the exemption, which is intended to help the transition of existing crypto-asset sector players to the new regime. 

More regulations are expected which are likely to prohibit collective investment schemes and pension funds from exposure to crypto assets. Derivative instruments or other securities that reference crypto assets as the underlying assets should also be excluded from these long-term savings vehicles.

Taming the wild west

There is a lot of uncertainty regarding cryptocurrency regulation. However, the SARB aims to develop a regulatory framework for crypto exchanges that will allow for cryptocurrency listing. The SARB has confirmed that it will enforce know-your-customer (KYC) requirements and, where applicable, submission of Suspicious Transaction Reports to the FIC. 

The cowboys who misuse cryptocurrency for illegal purposes must not be allowed to ruin the market for legitimate users. Cryptocurrency, originally a vehicle for investing, often speculatively, is now becoming an accepted form of payment. The businesses that accept crypto payments are still predominantly in the US, such as Microsoft, Paypal, Starbucks, AMC Theaters, and AT&T. But inevitably take-up of crypto will spread, just as alternative payment methods such as SnapScan and ApplePay have. Cryptocurrency has certain benefits that may make it particularly attractive to the South African environment, where there are still many unbanked people. Crypto is subject to fewer fees; you can make or receive payment wherever there is internet connectivity; and it is available to everyone, i.e. those who do not have access to financial services like banks and loans tend to have internet connections through mobile devices. Anyone with an internet connection can make and receive payments, borrow money, or access financial services wherever they are.

For more information

SD Law is a firm of experienced attorneys based in Cape Town, with offices in Johannesburg and Durban. If you want to know more about cryptocurrency, or need assistance with other digital concerns, including compliance with POPIA, cyberbullying and cybercrime, call Simon on 086 099 5146 or email

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The information on this website is provided to assist the reader with a general understanding of the law. While we believe the information to be factually accurate, and have taken care in our preparation of these pages, these articles cannot and do not take individual circumstances into account and are not a substitute for personal legal advice. If you have a legal matter that concerns you, please consult a qualified attorney. Simon Dippenaar & Associates takes no responsibility for any action you may take as a result of reading the information contained herein (or the consequences thereof), in the absence of professional legal advice.

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