ARTICLES
A few South African centsworth on bitcoin1
A Nieman*
LLB; LLD (North-West University). Practising Advocate, Johannesburg Society of Advocates, Sandton. Part-time lecturer, Department of Auditing, University of Pretoria. Email: nieman@conwaytransport.com.au or conwaytransport.com.au@conwaytransport.com.au
SUMMARY
This article is aimed at augmenting current awareness of virtual currencies ("VCs") in the South African legal community. To this end, it introduces the reader to VCs in general and decentralised convertible VCs ("DCVCs") in particular. Due to their design and interaction with the real economy and currency, DCVCs are on the radar of many financial regulators worldwide. As Bitcoin is considered the leading type of DCVC in terms of value and volume, its early beginnings in South Africa are probed. Although regulation should follow innovation, awareness of the VC ecosystem will not only warrant appropriate regulatory intervention when the time comes, but will also enable the growth and development opportunities associated with VCs. South Africa has not promulgated any legislation pertaining to VCs. The potential applicability of all current legislation and regulations relevant to VCs calls for in-depth research. This article aspires to serve as an appetiser to do so.
Keywords: Bitcoin; currency; virtual currency; cryptocurrency
1 Introduction
If cash is king, cryptocurrencies may be the next closest thing and we, South African lawyers, are largely clueless (as with too much of the Internet of Everything1unfortunately). Aspiring to absolution from this collective cluelessness begins with knowing that we know not and with cultivating a better understanding of the business of binary. In doing so, we may position and empower ourselves to become better ICT2lawyers.
Recently, courtesy of the Commonwealth Secretariat, I was collaborating with a few bitcoin enthusiasts in assessing the South African state of the nation apropos virtual currencies ("VCs"). Representatives of 10 Commonwealth member states met in London, the United Kingdom, on 17 and 18 February The roundtable was attended by officials from 10 countries and a number of partner organisations with an interest in the field of VCs. The representatives agreed, inter alia, to conduct a survey on VCs, aimed at collecting information which may assist in developing appropriate legislative and regulatory responses to VCs. The VC survey was initiated in Singapore, India, Tonga, Ghana, New Zealand, Kenya, Nigeria, Barbados, Uganda, Jamaica and South Africa.3
South Africa is thus also on the VC map, for better or for worse, given the pros and cons of VCs.
As, firstly, an African - in the eye of the beholder - who is stirred by ubuntu,4and, secondly, as an alumnus of the North-West University committed to contribute my bit5 to the centenary edition of the Potchefstroom Electronic Journal ("PER"), I am spending this year's 67+ minutes on Nelson Mandela International Day6 to write up a few South African cents' worth of bitcoins on Bitcoin. Augmenting current awareness of VCs, particularly Bitcoin, is indeed doing something positive for the South African legal community. The potential growth and development opportunities associated with VCs are immense (and for all we know, we may have another Shuttleworth or Musk in our midst who will leverage these in the near future).
This article sets out to introduce the reader to VCs in general and decentralised convertible VCs ("DCVCs") in particular. Bitcoin is considered the leading type of DCVC in terms of value and volume.7 Since Bitcoin is becoming local, its early beginnings and prevalence in the South African marketplace are probed, adjacent to the South African regulatory response to VCs in general.
2 Who's moving my cheese?8
VCs defined
VCs are many things to many people, possibly even unwittingly so. The concept of VCs is not a new one. To some extent, all currencies can be seen as virtual, given that for centuries now, currencies have been separated from the value of the goods that they represent.
The reason why VCs (and particularly Bitcoin) could be historically dramatic is clear from the colourful narrative of modern money. People initially swapped what they had for what they preferred, by bartering. However, when a person accepted what she or he did not want personally, because a third person who did have what this person wanted would accept it, the means of exchange became called money. Curiously and notoriously, virtually everything has been used as money, from sharks' teeth and cigarettes to stones and slaves.9
VCs, similarly, are a proxy for value, can take on a variety of forms and are seeing use across the payment landscape (including air miles, credit card points, retail loyalty or reward points, coupons, bitcoins, litecoins, altcoins, free applications ("apps") and content, game-based and in-app VC purchases). Even time and personal data, when bartered to receive something in return, can be seen as VCs. However, of the many applications of VCs, its use as a marketing and loyalty tool has been most prolific, helping to propel it into widespread use today. The VCs market is clearly multifaceted (and lucrative).10
The definition of VC provided for the purposes of the Commonwealth Secretariat's VC Survey accords with the definition used by the Financial Action Task Force ("FATF")11 in its Virtual Currencies Key Definitions and Potential AML/CFT Risks Report,12published in June Both these definitions are almost identical to the definition used by the National Payment System ("NPS") Department of the South African Reserve Bank ("SARB") in its Position Paper on Virtual Currencies13issued on 3 December
A virtual currency (VC) is a digital representation of value that can be digitally traded and functions as a medium of exchange, a unit of account and/or a store of value, but does not have legal tender status.14
The SARB manifestly ascribes to the FATF's aim to aid discussion between FATF members by proposing vocabulary to provide a common language for developing conceptual tools which could assist in understanding how VCs operate and the risks and potential benefits they offer.15 In keeping with the FATF classification, the SARB further classifies VCs as either centralised or decentralised, and convertible and non-convertible:
(a) All non-convertible VCs are centralised to a particular virtual community and cannot be exchanged for real currency (examples include: Q Coins; World of Warcraft Gold;16and Project Entropia Dollars).17
(b) Convertible VCs have an equivalent value in real currency and can be exchanged back and forth for a real currency. Convertible VCs may be either centralised or decentralised:
[i] Centralised convertible VCs have a single third-party administering authority, who functions as a neutral entity between the principals in a transaction, and who controls the system. This administrator issues the currency, establishes the rules for its use, maintains a central payment ledger and has authority to redeem the currency. Examples of centralised VCs include Second Life Linden dollars; WebMoney ("WM Units"); and PerfectMoney.18
[ii] DCVCs are distributed, open-source, math-based peer-to-peer VCs that have no central administering authority, and no central monitoring oversight. Examples of DCVCs include Bitcoin; LiteCoin and Ripple. DCVCs are considered cryptocurrency, i.e. a math-based DCVC that is protected by cryptography.19
The SARB, for the purposes of its position paper, further clarifies that DCVCs, as a subset of VCs, refer:
specifically to decentralised, crypto-currencies that interact with the real economy, i.e. is (sic) exchangeable for legal tender and may be used to purchase real world goods and services.20
The South African National Treasury User Alert: Monitoring of VCs21 defines VC as follows:
A virtual currency is a unit of account that is digitally or electronically created and stored. Members of the virtual community agree to accept these units as a representation of value in the same way that currency is accepted. In contrast to traditional currencies, virtual currencies operate without the authority of central banks, and are therefore not regulated.
However, neither the SARB nor the FATF consider electronic money (e-money) as part of the VCs ecosystem. The SARB refers to mobile money as a form of e-money and as such, this contribution will not focus on either, other than to distinguish them from DCVCs.22
The FATF Report on Virtual Currencies Key Definitions and Potential AML/CFT Risks23directs that VCs are distinct from e-money as e-money is:
a digital representation of fiat currency used to electronically transfer value denominated in fiat currency.24
E-money is therefore considered to be:
a digital transfer mechanism for fiat currency - i.e., it electronically transfers value that has legal tender status.25
In its Position Paper on Virtual Currencies,26the NPS Department of the SARB cross-references its Position Paper on Electronic Money27issued in November , and reiterates its definition of e-money as:
electronically stored monetary value issued on receipt of funds and represented by a claim on the issuer.28
The SARB points out that e-money, in its various forms (such as "Internet banking, mobile payments, mobile banking and prepaid instruments"29) is generally accepted as a means of payment by persons other than the issuer and is redeemable for physical cash or a deposit into a bank account on demand. The SARB further declares the issuance of e-money as the business of a bank as defined in the Banks Act 94 of , and directs that there is therefore a clear distinction between DCVCs and e-money, as DCVCs are "tradable for cash, while e-money is redeemable for physical cash or a deposit into a bank account on demand."30
The use of mobile money, considered by the SARB as a form of e-money, is legal within South Africa but its issuance and trading is limited to banks.31 No legal and regulatory framework has been established in South Africa to support mobile money.32
In further narrowing the scope of this contribution to practicable parameters,33 customer loyalty or reward programs are not probed. A client loyalty/reward program (such as South African eBucks34 and already in , more than others)35 can be defined as a programme where consumers accumulate free points or miles based on the purchases of goods or services from a supplier. The consumer can exchange these points or miles for a variety of commodities (including goods, services or a discount on a next purchase transaction) at a supplier. Loyalty or reward points can, however, typically not be redeemed for fiat currency.
The SARB asserts that DCVCs, in particular, are on the radar of many financial regulators worldwide due to their design and interaction with the real economy and currency, and the fact that DCVCs tend to be traded between users with a high degree of anonymity. Crime follows currency and the emerging VC regulatory proposals are directed at managing the risks associated with DCVCs. The SARB therefore focuses its attention on DCVCs.36 In keeping with the position of the SARB, this article focuses on DCVCs, specifically Bitcoin, which is considered the leading type of DCVC in terms of value and volume.37
Enter Bitcoin
In a mysterious new technology - Bitcoin - emerged, seemingly out of nowhere, but actually as the result of two decades of intense research and development by a nearly anonymous researcher or researchers, called Satoshi Nakamoto. "Bitcoin in " has been labelled as being as disruptive a technology as the Internet in and personal computers in 38
Bitcoin is a consensus network that enables an entirely novel payment system and a VC complete. It is a decentralised peer-to-peer payment network that is powered by its users with no central authority or middlemen. Bitcoin can be considered cash for the Internet. From an end-user perspective, Bitcoin is nothing more than a mobile app or computer programme that provides a personal Bitcoin wallet and allows a user to send and receive bitcoins.
Nobody owns the Bitcoin network, much as no one owns the technology behind email. Behind the scenes, the Bitcoin network shares a public ledger called the "block chain." This ledger contains every transaction ever processed, allowing a user's computer to verify the validity of each transaction. The authenticity of each transaction is protected by cryptography and digital signatures corresponding to the sending addresses, allowing all users to have full control over sending bitcoins from their own Bitcoin addresses.
In addition, anyone can process transactions using the computing power of specialised hardware and earn a reward in bitcoins for this service. This is called Bitcoin mining. Mining is the process of spending competitive computing power to process transactions, secure the network, and keep everyone in the system synchronized.. It can be perceived as being the Bitcoin data center, except that it has been designed to be fully decentralised with miners operating in all countries and no individual having control over the network.39 As with mining all finite resources, the stream of bitcoins will eventually run dry, as only 21 million bitcoins will be generated at an exponentially decreasing rate over 20 years. Like mining in the physical world, the last dregs of precious metal will be the most difficult and expensive to mine.40
A Bitcoin transaction typically includes the following entities: a Bitcoin sender who initiates the transaction over the Bitcoin network; a Bitcoin receiver who accepts the bitcoins; Bitcoin miners that act as transaction verifiers and processors by completing blocks; the core Bitcoin development team, which updates the Bitcoin codebase as necessary; and Bitcoin currency exchanges, which facilitate the conversion of bitcoins to other currencies and vice versa.41
The potential of Bitcoin is not solely limited to serving as a payment alternative - it has also been viewed as a commodity, asset class, or security ripe for speculative investment.42 Bitcoin is furthermore the most prominent triple entry bookkeeping system in existence.43 It is seen by some44 as a global, distributed, asset register or accounting ledger, which can account for the transfer of ownership between parties without the need for a trusted intermediary. This transfer can then be programmed to represent virtually anything: a share certificate, a title deed, an electronic Dollar or electronic Rand or a social grant token to buy food at a registered supermarket. Owning bitcoins gives a person access to this accounting ledger, which is a highly liquid, global asset and which can be traded for any other currency. It therefore acts like a VC but it is much, much more.
Bitcoin initially stood as a novel idea of how financial transactions in the future would be conducted. However, by March it had proved itself to be a legitimate and viable form of currency45 and the use of Bitcoin is ever growing. As commerce is becoming more globalised, currencies that are not tied to a sovereign are increasingly appealing. The growing adoption of Bitcoin on a global scale might indicate that the currency is here to stay.46 As a result, governments cannot ignore it. The recent increase in regulatory developments for VCs suggests that governments understand this. These regulatory developments, curiously, may have the effect of possibly further driving market adoption of VCs by the legitimisation thereof.47 Up to now, regulatory response from the South African regulators has been limited.
3 South African regulatory response to VCs
No primary or secondary legislation pertaining to VCs has been promulgated in South Africa.48No public consultation by which parliament and provincial legislatures consult with the people and interested or affected individuals, organisations and government entities before making a decision has taken place in respect of VCs in South Africa.49
The potential applicability of all current legislation and regulations relevant to VCs in South Africa calls for in-depth research50 and although the time is opportune, this article cannot begin to aspire to do so. A high-level overview of the regulatory ecosystem faced only by South African banks and financial institutions uncovers 53 acts that impact the financial sector specifically and an additional acts that impact the business sector in general.51 This does not include self-regulatory and co-regulatory oversight over the financial and banking sectors, but includes legislation with indirect impact.
However, the National Payment Systems Act 18 of ("NPSA") gives the SARB the power to issue Directives, Position Papers, Circulars and Guidances. A contravention of a SARB Directive is an offence in terms of section 12 of the NPSA. The SARB publishes Position Papers in order to state its position in respect of specific payment system issues. These documents normally contain approaches, procedures and policy matters, which are applicable at a particular time.52 Although a Position Papers does not have the same legal binding power as a Directive, it is usually followed because of the persuasiveness of its having been issued by the SARB.53 Also, if the SARB is so inclined it may issue a Special Directive aligned with the Position Paper and may seek a High Court order requiring compliance.54
The absence of legal and regulatory frameworks in respect of VCs in South Africa is confirmed by various references in the SARB's Position Paper on Virtual Currencies.55The SARB emphasizes that it does not oversee, supervise or regulate the VC landscape, systems or intermediaries for effectiveness, soundness, integrity or robustness. Consequently, any and all activities related to the acquisition, trading or use of VCs (particularly DCVCs) are performed at the end-user's sole and independent risk, and end-users will have no recourse to the SARB.56 The SARB highlights certain risks due to what it refers to as the generally unregulated nature of VCs and the many legal uncertainties regarding VC schemes57
(a) The lack of a proper regulatory and legal framework substantially exacerbates especially risks associated with the enforcement of the principle of finality and irrevocability in the payment systems.58
(b) No specific regulatory protection exists that would compensate the owner or user of VCs for any loss that may be suffered, should the VC fail or the business ceases to exist. Users need to be warned that they might lose their money.59
(c) Reputational risks and losses could also arise where VCs are offered to existing customers and unregulated VCs will conflate with regulated products by association.60
(d) Compared to conventional currencies, VCs are less susceptible to freezing or seizure actions by law enforcement agencies. The identification of relevant laws applicable to the contravention and the consequent gathering of evidence regarding a transaction can furthermore become an unattainable task.61
(e) VC wallets and exchange operators have no obligation to provide disclosures to consumers related to service fees or charges associated with VC transactions, the volatility and unregulated nature of the VC ecosystem, or any of the other associated risks.62
(f) The transfer of VCs in and out of RSA is not supported by exchange regulations and requests to trade in VCs cross-border can therefore not be authorised by the SARB. If any such trades do take place, the risks associated with such trades are for the participants in such trades.63
The SARB concludes that given the current landscape and information available, VCs pose no significant risk to financial stability, price stability or the NPS. However individuals or businesses that accept VCs and businesses involved in the VCs ecosystem are cautioned that any activities performed or undertaken with VCs are at their sole and independent risk.64 The SARB reiterates its position that regulation should follow innovation but that it continues monitoring developments in this regard and reserves the right to change its position should the landscape warrant regulatory intervention.65
The absence of legal and regulatory frameworks in respect of VCs in South Africa is further confirmed by various references in the User Alert: Monitoring of Virtual Currencies66issued by the South African National Treasury, and endorsed by the SARB, the Financial Services Board ("FSB"), the South African Revenue Service ("SARS") and the Financial Intelligence Centre ("FIC") on 18 September The user alert similarly warns that there are no specific laws or regulations that address the use of VCs and that, consequently, no legal protection or recourse is afforded to users of VCs. Due to their unregulated status, VCs cannot be classified as legal tender as any merchant may refuse them as a payment instrument without being in breach of the law.67 VCs can also not be regarded as a means of payment as they are not issued on receipt of funds. The use of VCs therefore depends on the other participant's willingness to accept them. While VCs can be bought and sold on various platforms, they are not defined as securities in terms of the Financial Markets Act.68The regulatory standards that apply to the trading of securities therefore also do not apply to virtual currencies.69
Moreover, the National Treasury emphasises that VCs also operate without the authority of central banks, in contrast to traditional currencies, and are therefore not regulated.70 Because virtual currencies are not regulated, users are not protected and are accordingly at the risk of losing money.71 It also warns users that they deal in VCs at their own risk and with no recourse to South African authorities.72 An invitation is issued, however, to email questions, comments and any concerns in respect of investment proposals through VCs to the treasury.73 The associated email address74 returns an invalid recipient server error, which I suppose, in some way, affirms the warning about a lack of recourse.
The SARB, South African National Treasury, FSB, SARS and FIC have made it abundantly clear that, for now, the public is on its own as far as VCs are concerned. The primary public policy objectives that impact the regulation of VCs include providing consumer protection, preventing money laundering, maintaining the safety and soundness of the financial system and preventing tax evasion.75 However, no legal or regulatory frameworks have been developed specifically for VCs in South Africa as yet.
4 The beginnings of Bitcoin - a South African snapshot76
Despite the absence of a South African regulatory response, there is no denying that the South African public is probing Bitcoin.
Generally, Bitcoin has been and is very visible in South Africa, although with an apparent regional bias towards Cape Town. South Africa, for example, held its first commercial Bitcoin conference in April in Cape Town.77 Local innovator Lorien Gamaroff of Bankymoon,78 a local blockchain smart metering solution provider for prepaid electricity and energy management, was one of the keynote speakers. Bithub, a VC hub and incubator, has just been launched by the Cape Innovation and Technology Initiative ("CiTi").79 Regular Bitcoin meetups have been taking place in Cape Town and Stellenbosch since November 80 Regular Bitcoin meetups have also been taking place in Johannesburg since November 81 Widespread, general coverage of Bitcoin has been prevalent in the media, especially with big price movements making the news. One of the more established publishers in the VC space, Cointelegraph,82 also has a local outfit.83
In addition to the users of Bitcoin, the ecosystem supporting Bitcoin has been growing exponentially.84 The three main categories of such supportive systems are firstly, the merchants who accept bitcoins as payment for goods and services; secondly, the Bitcoin mining community; and thirdly, Bitcoin exchanges. The presence and prevalence of these supportive systems within South Africa are probed below.85
Merchants
Bitcoin has been widely adopted by merchants within South Africa as a mode of payment. This is evidenced by the fact that Payfast,86 a prominent South African payment platform, has integrated Bitcoin into the checkout processes of over 30 of its clients (i.e. online merchants using its platform). South Africa's largest online retailer merchant Takealot87 also accepts bitcoins88 via this integration with Payfast.
There are furthermore various listings of South African Bitcoin and bitcoin-accepting merchants inter alia on Coinmap (42 listings),89 Whotakescoin (12 listings),90 Bitcoinzar (47 listings),91 and Ventureburn (10 listings).92 BitX also lists places to spend bitcoins in South Africa (22 listings).93
However, only one example of immovable property94 listed for sale in bitcoins95 and one example of a South African citizen currently trying to sell movable property96 for bitcoins could be located.97
It is furthermore possible to purchase overseas goods or services online using bitcoins (via Payfast or with bespoke commerce plugins) and then have such goods or services delivered remotely to residents within South Africa. Overstock,98 for example, accepts purchases paid for with bitcoins from South Africa.99 Interestingly, the Dell international website accepts purchases paid for with bitcoins, but does not accept international orders. The local Dell website does not yet accept any form of online sales and puts clients in touch with local resellers.
It is similarly possible to purchase goods or services online from local e-retailers using cash or loyalty and reward points (such as eBucks) or DCVCs (such as Bitcoin) and have such goods or services delivered remotely to residents within South Africa. Certain security and identity checks must be satisfied to access these goods or services. Postal deliveries typically require identification on collection (and often customs duties payment, if purchased from abroad), whereas courier deliveries typically require a home address and identification on delivery.
Miners
The entire spectrum of Bitcoin miners is represented within South Africa, from miners using gimmicky universal serial bus ("USB") devices, to Bitcoin application-specific integrated circuit ("ASICs"), to cloud mining. South Africa also has a manufacturer of mining equipment accessories, called OpenRigs, which manufactures racks for mining clusters.
Miners typically choose a coin that is profitable and less difficult to mine. Due to the lower barrier to entry, miners operating in South Africa would typically mine altcoins (including common examples such as Litecoin, Monero and Primecoin) or any one or more of the large number of altcoins and cryptoassets available. There are, for example, currently VCs and 57 cryptoassets listed on Coinmarketcap; and cryptocoins listed on Crypto Database. A miner proper in the cryptography context is a party who spends resources on hardware to produce, for example, bitcoins rather than buying bitcoins from someone else. However, many persons consider themselves miners also for investing in the myriad of third-party cloud mining services available on the Internet (such services ranging from the renting out of enthusiast equipment to others, to services offered by enterprise Bitcoin cloud mining companies).
The sheer volume of different DCVCs available renders it too challenging a feat for the purposes of this article to attempt quantifying mining activity in South Africa. It is, in fact, very difficult to substantiate or quantify any numbers on miners. It should also be noted that online resources such as conwaytransport.com.au and conwaytransport.com.au typically do not contain geographic information.
South African Internet Service Providers ("ISPs") also explored hosting mining services. On the members' mailing list of the Internet Service Providers' Association ("ISPA"),ISPs have discussed costing models for hosting Bitcoin.
Exchanges
No bank currently provides VC services in South Africa (other than loyalty or reward progammes, such as eBucks or nedbankgreenbacks, and which are accepted by many merchants). However, infrastructure to support the interaction of VCs and fiat currencies exists within South Africa. This is evidenced inter alia by the active VC exchanges in South Africa, ie BitX, Ice3x, altcointrader and Localbitcoins; the active VC services/applications in South Africa; and even a Bitcoin automated teller machine ("ATM") in Johannesburg, South Africa.
VCs can be purchased in South Africa in cash, via credit card, and using electronic payment systems, as can be seen from the following examples:
(a) BitX accepts electronic fund transfers ("EFTs") but not cash or credit cards.Payments are made only to bank accounts held in the name of verified users. Due to exchange controls, trading is limited to South African residents only.
(b) Ice3x accepts EFTs but not cash or credit cards. Payments are similarly made only to the bank accounts of verified users.
(c) Altcointrader unfortunately does not publish accepted payment types on its website.
(d) South African merchants using Localbitcoins accept one or more of cash, cash-by-mail, EFT, Society for Worldwide Interbank Financial Telecommunication ("SWIFT") transfer, moneygram, PerfectMoney, OKPay, Paypal, Western Union and Steam Gift Card.
Although no banks with premises in South Africa offer financial services involving VCs, the BitX, Ice3x, Altcointrader and Localbitcoins exchanges do indeed offer such financial services. However, there are currently no commercial remittance or foreign exchange services active in South Africa using VCs. Manual remittance is possible and practical, where the party receiving bitcoins is able to sell it via several local exchanges, or via Localbitcoins. Charges vary from 1% on exchanges up to 6% for the Bitcoin ATM.
The transactional volumes generated by each of the South African VC exchanges are published as public feeds and are set out below. The calculations are based on downloadable files and/or manually-obtained figures located at third-party exchange graphing sites, such as CryptoCoin Charts:
(a) BitX volumes: from 13 April to 4 June , BitX traded R59,, (EUR m) in fiat terms; or 13, BTC in Bitcoin terms.
(b) Ice3x Bitcoin volumes: from 15 May to 4 June , Ice3x traded R1,, (EUR 83k) in fiat terms; or BTC in Bitcoin terms.
(c) Ice3x Litecoin volumes: from 18 May to 4 June , Ice3x traded R21, (EUR ) in fiat terms; or LTC in Litecoin terms.
(d) Altcointrader volumes: no long-term historical data is available as the Altcointrader website reveals only the last 50 trades. As it is a relatively new exchange, without an application programming interface ("API") access, it is not being tracked by any third-party exchange graphing and monitoring sites yet either.
(e) Localbitcoins volumes: from 24 May to 04 June , Localbitcoins for South Africa traded R45,, (EUR m) in fiat terms; or BTC in Bitcoin terms.
It is interesting to note that BitX, the biggest VC exchange in South Africa, initiated contact and registered with the FIC as an accountable institution, and as such aspires to comply with the Financial Intelligence Centre Act("FICA").
5 Conclusion
This article set out to augment current awareness of VCs in the South African legal community. To this end, it introduced the reader to VCs in general and DCVCs in particular.
Due to their design and interaction with the real economy and currency, DCVCs are on the radar of many financial regulators worldwide. Although regulation should follow innovation, awareness of the VC ecosystem will not only warrant appropriate regulatory intervention when the time comes, but will also enable the immense potential growth and development opportunities associated with VCs.
As Bitcoin is considered the leading type of DCVC in terms of value and volume, this article probed its early beginnings in South Africa. Bitcoin is indeed becoming local and brings with it novel challenges and places pressure on established legal and regulatory frameworks that were not developed to respond to it. Certain challenges may potentially be managed within the existing South African legal and regulatory framework, while other unique legal and regulatory concerns may be incapable of such reconciliation.
South Africa has not promulgated any legislation pertaining to VCs and assessing the potential applicability of all current legislation and regulations relevant to VCs calls for in-depth research. The time is opportune and this article has aspired to serve as an appetiser to do so.
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LIST OF ABBREVIATIONS
API Application programming interface
ASIC Application-specific integrated circuit
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