It seems South African regulators are grappling with how to regulate Bitcoin. A lot of people, in Mzansi, are participating in the Bitcoin rush drawn in by the tantalising prospect of massive returns that even the best traditional stock traders cannot dream of getting. Here are some of the big things we have learnt about Bitcoin in South Africa over the past week or so:
- First, we learnt that the South African Reserve Bank doesn’t allow South Africans to buy Bitcoin from international exchanges using their Visa/MasterCards. The bank does also not allow people to convert their Rands into foreign currency so they can buy Bitcoin at foreign cryptocurrency exchanges. Reading between the lines, it simply means you are not allowed to move funds from South Africa so you can buy Bitcoin.
- Then we learnt that two South African brothers who owned and operated a Bitcoin investment company called Africrypt, disappeared with 69 000 Bitcoin worth billions of US dollars in mid-April. They did this by asking people to deposit money into Africrypt’s FNB bank account, then buying Bitcoin from the local exchange Luno. Once they were satisfied with their lucre, they transferred it to overseas Bitcoin wallets and made good their escape.
The South African Reserve Bank has now promulgated another rule: South Africans are no longer allowed to transfer Bitcoin bought from local exchanges to wallets/exchanges that are outside South Africa. It’s not clear whether this is a new rule made in the wake of the Africrypt heist or this is just an elaboration or expansion of a rule that already existed.
Of particular note is that the rule came through a Bitcoin-related Frequently Asked Questions paper published by the SARB as part of a group known as Intergovernmental Fintech Working Group (IFWG). Think of it as something like Zimbabwe’s Joint Operations Command but this one focuses on South Africa’s financial and economic regulations. It’s made up of Competition Commission, Financial Intelligence Centre, Financial Sector Conduct Authority, National Credit Regulator, National Treasury, the South African Revenue Service, and the South African Reserve Bank.
Exchange Control Regulation 10(1)(c) prohibits transactions where capital or the right to capital is, without permission from National Treasury, directly or indirectly exported from South Africa.The rule that prohibits South Africans to transfer Bitcoin bought locally to exchanges/wallets outside South Africa
Will this stand?
Bitcoin was purposely created to be independent of central governments and can be moved around freely without relying on traditional centralised authorities. The nerd/group of nerds who created this did so in the wake of the 2008 global financial crisis which is often blamed on the warped government.
Governments around and authorities around the world including the SARB, RBZ, Central Bank Nigeria, Chinese Central Bank, US Treasury and many others are grappling with that fact. The best the South African Reserve Bank and its affiliates can do is to criminalise this act but they can expect defiance. Not even crypto exchanges can stop the flight of capital across the borders, all they can do is to report whoever does so to the South African Reserve Bank
That’s if they can even prove someone has transferred funds outside South Africa. Bitcoin wallets are not physical and a wallet address doesn’t betray the country of its owner. So all one needs to do to bypass this is to transfer the Bitcoin bought on Luno to another local wallet and then send it to a foreign wallet. While all transactions are traceable it be very hard to keep track of all transactions after the money has left Luno and determine whether funds have left South Africa.
Besides, the new rule essentially means South Africans are not allowed to buy stuff online or pay foreign companies using Bitcoin. So does this mean all Bitcoin held by South Africans is doomed to remain there in South African wallets? Somehow I doubt people will listen to this rule.
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