A friendly glance at Crypto-“Currencies”

The Financial Sector Conduct Authority (FSCA) recently said that it will soon publish the regulatory framework for cryptocurrencies in South Africa. Many in the industry, especially those who support the technology, have been anxiously awaiting this legislation for quite some time. Previously, the FSCA was vocal about declaring cryptocurrencies as financial products and this past week the Prudential Authority Division at the South African Reserve Bank (SARB) shared a similar sentiment. The Prudential Authority also asked banks to work with crypto exchanges instead of simply closing their accounts.

We maintain that more regulation is needed in the cryptocurrency space to protect consumers against all of the scams that we have read so much about during the last couple of years. Only with effective legislation can this superior technology be adopted by the masses. And it truly is superior. Even in its infancy, the cryptocurrency environment is allowing for faster and safer transactions worldwide, often at no cost. The environment also allows markets to be open 24/7, which means that consumers always have access to liquidity. With blockchain technology, the backbone of cryptocurrencies, you do not have to wait two or more days for money to reflect in your account – most of the time it happens instantly. But there are, of course, many other benefits of having a market that is always open. The cryptocurrency market also has fewer foreign exchange controls, which means that no one can tell you what you are allowed to do with your money; a key concern for regulators, of course. Another benefit of some cryptocurrencies is that they allow for decentralisation. This characteristic allows the collective to govern themselves without handing their sovereignty over to the government. But with these and other efficiencies, the technology can also be exploited for the wrong reasons, and it is for this exact reason that clever regulation is needed.