Since 2009, the year they were officially launched on the market, cryptocurrencies have never ceased to amaze. These digital representations of value – of which Bitcoin is undoubtedly one of the best known – are characterised by great volatility, by the total absence of a central bank or public body governing them, but also by the fact that they are traded online and increasingly used for real purchases, especially in those countries that have already equated it with a traditional currency (such as Japan), thus giving it full currency status. It is precisely because it has not yet been legally regulated that cryptocurrencies are still seen as a possibly risky instrument, as a source of trouble or multi-million dollar scams. In a country like South Africa, for example, a few unscrupulous individuals have managed to swindle thousands of people (and colleagues) out of cryptocurrencies, making off with huge amounts of money stolen from savers. In recent years, numerous cryptocurrency scams have taken place in the African country, including the largest ever, culminating in the theft of several billion dollars by two very young managers who tried to cover up the theft by spreading the news of an alleged hacker attack, advising employees not to contact the police.
South Africa and cryptocurrencies
Despite being one of the most economically developed nations on the African continent, with a strong financial system, South Africa has proven particularly vulnerable to online fraud and scams perpetrated through cryptocurrencies. Following massive scams, such as the one that took place in April, the African nation has therefore decided to tighten up its cryptocurrency-focused regulations, with the aim of preventing further scams that could undermine its excellent international reputation in online trading.
According to case studies, the most common scams in South Africa have been perpetrated through Ponzi schemes – a well-known pyramid scheme whereby the bulk of the gains invariably end up at the top of the company, leaving those at the bottom in a bind due to false promises of easy money or improbable career jumps – which have been used to siphon off large amounts of cryptocurrency from numerous investors. It has been calculated that about 70,000 Bitcoins, or almost USD 4 billion, have already been stolen using this method in South Africa. The most tempting bait, from this point of view, were precisely those linked to high-yield investment products. Individuals were asked to invest Bitcoin or other currencies in large amounts, with the (bogus) promise of high returns in the following months.
A regulatory issue
One of South Africa’s main problems in dealing with these fraudulent transactions is a regulatory one: the Financial Sector Conduct Authority cannot even investigate cryptocurrencies, because current regulations do not yet consider them to be real financial assets. This is one of the reasons why the African nation is scrambling to further strengthen its legislative system: to create a comprehensive, organised legal system capable of keeping even unusual and elusive currencies like cryptocurrencies under control. What is needed, in a world that will soon become familiar with cryptocurrencies, is a clear government licence, some self-regulation and more transparent practices, perhaps with the concrete support of some institution set up specifically to govern these kinds of operations. In South Africa, something similar is already happening in the field of Forex, whose brokers must be approved by the FSCA (the aforementioned Financial Sector Conduct Authority).
In South Africa, the culture of cryptocurrencies is now widespread. Some online gambling and slots platforms, such as Casinos.co.za, have already made Bitcoin and cryptocurrencies available as accepted payment methods, offering every new player the opportunity to make a convenient cryptocurrency deposit. This kind of payment ensures 100% complete privacy, as well as extremely low transaction costs. In this sense, cryptocurrency payments can greatly contribute to the overall value of the gaming experience, making it even more enjoyable to indulge in Poker or Roulette.
Building on the strength of its financial regulatory framework, and the now almost widespread knowledge of cryptocurrencies, South Africa has an opportunity to promote a major legislative reform that protects cryptocurrency investors, positioning itself as one of the world’s most innovative players in the field of managing new crypto assets.