The popularity surrounding cryptocurrency is only increasing as time wears on crypto regulations in South Africa may be a little more behind on regulating the processes associated with it, as Cryptocurrency itself cannot be regulated in its entirety, but more provision is being made to accommodate it.
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Choose your quick section of our Crypto Regulations review below.
A Quick Overview of our Crypto Regulations Review:
- ✔️A short introduction to cryptocurrency
- ✔️Properties associated with Cryptocurrencies
- ✔️Is it legal to mine cryptocurrencies?
- What do regulations in South Africa say about Cryptocurrency?
- Is cryptocurrency considered a currency in South Africa?
- South Africa and the rest of the world
- What is the role of regulation in the South African context?
- How to obtain legal recourse
- Project Khokha
- Can regulations which are put in place work?
Here is a more in-depth look at the regulations regarding Cryptocurrency in South Africa.
A short introduction to cryptocurrency
There are very few people who have not yet heard the word ‘Crypto’ or ‘Cryptocurrency’ mentioned at some or other point.
Cryptocurrency, or digital currency, is currency which has been encrypted cryptographically. All transactions which involve cryptocurrency are recorded on a public ledger which is more commonly known and referred to as ‘blockchain’.
Blockchain technology has numerous uses, some of which are not specifically only tied to cryptocurrency, it also serves uses in healthcare systems, supply chain management, and numerous others.
When applied to cryptocurrency, it is used to record all transactions and ensures that it is transparent in nature. Bitcoin was the first digital currency launched over a decade ago by the anonymous Satoshi Nakamoto.
After Bitcoin was launched, numerous other cryptocurrencies have been launched, with each having a different use case. All other cryptocurrencies, apart from Bitcoin, are referred to as ‘altcoins’, or alternative coins.
Properties associated with Cryptocurrencies
Cryptocurrencies are encrypted
This is an aspect which truly makes cryptocurrencies so reliable and secure, the fact that they are all cryptographically encrypted.
The simple definition of encryption is that it concerns meaningful data being converted into a code which cannot by understood or decoded by any individual who does not possess a key to do so.
As the backbone of cryptocurrencies, encryption is what makes it so secure and when data is encrypted, there is only one key which can encrypt or decrypt it.
Where cryptocurrencies are concerned, however, there are two keys created and they are mathematically linked to one another. While the one is used to encrypt, the other is used to decrypt.
The key which is used to encrypt the data is known as the public key, which can be shared with the public where payment receipt is concerned. The other key used to access cryptocurrencies, the private key, must be secured, kept secret, and never lost.
Cryptocurrencies are decentralized
The decentralized nature of cryptocurrencies is a core concept thereof as opposed to banks, which are centralized. Banks are governed by a regulatory body which is in control of all the funds.
The regulatory body also governs the way in which the monetary system operates. Should this governing body fail, it could lead to the collapse of the entire banking system. It is therefore that cryptocurrency supporters believe that there is dire need for a decentralized system.
Cryptocurrencies function according to a set of protocols which are not issued, controlled, or governed by a single person or entity. Instead, these protocols work according to predefined mathematical laws upon which the entire network arrives at a consensus.
There is a distributed system involved
Systems which are based on blockchain are known as Distributed Ledger Technologies, or DLTs. This means that blockchain can be located across all computers of the network.
Any transaction which is verified, is recorded in all of these computers. This means that the ledger is accessible by anyone on the network, which provides complete transparency, and transactions must be verified by the members who form part of the network.
As soon as there is an appropriate number of members on the network who have come to, or arrived at, a consensus, the transaction is completed successfully. This ensures that there is no fraudulent or illicit activity during a transaction.
Cryptocurrencies are transactable
Cryptocurrencies can be sent from one person on the network to another and it can be used for the same purposes as fiat currencies, such as paying bills, purchasing goods and services, and more, depending on whether it is accepted by a merchant.
As soon as cryptocurrencies are sent from the owner’s wallet to another, the transaction is recorded on the ledger. However, before that happens, the transaction has to be verified by members of the network.
These members ensure that the funds transferred is available in the sender’s wallet and as soon as this is verified, the transaction is then subsequently posted on the ledger.
Nodes
All the computers which form a part of the Bitcoin blockchain are referred to as nodes. These are basically the mechanism which are used for verification on the blockchain network.
Every node possesses a copy of the blockchain in its entirety and when a new transaction is initiated, nodes view the unverified transaction and compare it with their ledgers.
Even should a note accidentally validate a transaction that is incorrect, it will not work as the transaction requires a multitude of verifications. This important feature ensures that blockchain is incorruptible as there is no chance for fraud to take place.
Should a node, or a number of nodes, be found approving invalid or fraudulent transactions, it, or they, will be disconnected from the network permanently.
Crypto mining
Cryptocurrency mining should not be confused with the exchange or trade in cryptocurrency. Crypto mining results in two things, namely:
- The verification of transactions, and
- The generation or creation of new cryptocurrency.
New cryptocurrency is generated or created to reward those who mine it for the efforts towards the verification of transactions. Anyone who has the required hardware, software, and an internet connection can mine cryptocurrency.
However, it is a process which requires a substantial amount of electricity as it uses robust computational power to resolve complex mathematical problems, or algorithms, which help to solve, or mine, a block.
Once the block has been mined, the miners are rewarded with cryptocurrencies which are more commonly known as block rewards.
Is it legal to mine cryptocurrencies?
Despite its popularity, there is still a lot of talk surrounding the safety, security, and regulations surrounding cryptocurrencies. There are numerous countries in the world who have declared Bitcoin as illegal meaning that cryptocurrency mining is also prohibited and considered illegal.
It is not an illicit activity, so it may be difficult for some to understand why cryptocurrencies are outlawed in some jurisdictions around the world, especially when considering that it is decentralized.
Its decentralized nature is actually one of main reasons why there is such harsh hostility towards it along with the fact that it has a stateless nature which surrounds it.
Fiat currencies have the word of governments backing it whereas cryptocurrencies break this. In addition, anyone is allowed to join the network and contribute to its growth, which is another nightmare for certain governments around the world.
What do regulations in South Africa say about Cryptocurrency?
Cryptocurrency and blockchain are two of the most popular topics amongst millions of people around the world.
When considering that there are governments in various jurisdictions that have banned the trade, exchange, purchase, sale, and mining on cryptocurrency, it is imperative to explore what South Africa’s regulation is with regards to it.
As the move towards a more digitalized world proceeds, there are numerous countries that have taken a vote of non-confidence in cryptocurrencies whereas others have embraced it with open arms. China, for instance, has outlawed the use of crypto.
When considering Africa as a whole, there are numerous African countries that have banned cryptocurrency entirely. South Africa, on the other hand, as one of the largest economic hubs on the African continent, has substantial potential in becoming a leading country as far as the adoption of crypto and blockchain development is concerned.
However, the sector is experiencing slow growth and it is therefore time to consider what exactly is happening in the South African crypto industry and see which direction it might be headed in.
Is cryptocurrency considered a currency in South Africa?
Despite the fact that cryptocurrency has become increasingly popular in recent years, and that it has seen widespread acceptance in numerous countries as a currency, despite its digital nature, the South African Reserve Bank does not view it as such.
Due to the lack of requirements to be considered as a currency, cryptocurrency, and other digital assets, are merely referred to as ‘cyber-tokens’.
The approach which was taken towards cryptocurrency, or cyber-tokens involves the fact that digital assets cannot be considered currencies in the economic sense as they are not considered stable means of exchange, nor are they a stable unit of value.
In changes which were made to the Taxation Laws Amendment Act in 2019, cryptocurrencies were referred to as a hobbyist financial instrument. Until today, there have not been any laws or regulatory frameworks in South Africa that bans or regulates the usage of cryptocurrencies.
South Africa and the rest of the world
There are numerous patterns visible in the cryptocurrency industry in South Africa however, in various critical ways, these patterns reflect global patterns. There is great enthusiasm in cryptocurrency which has been expanding relentlessly in every global event, especially during the bear markets.
This is especially unique when considering the relation to both Western and European nations in which a plunge in intrigue can be noted. There are, however, some tendencies recreated from worldwide markets.
The first is one concerned with cryptocurrency being used as a theoretical resource instead of using cash, or fiat currency. This was received in utter amazement, provided that the far-reaching story involving cryptocurrency in Africa having taken a gander at exchanges.
There are experts who observe how their clients are selling their cryptocurrencies as soon as the prices rise and purchase as soon as the prices plunge. This would suggest that cryptocurrency instability is being used as a means to earn profits.
Even as a theoretical resource, cryptocurrencies are providing a much-needed arrangement within a nation as South Africa is one of the largest economies in Africa, next to Nigeria.
What is the role of regulation in the South African context?
South Africa has been making some progress where the cryptocurrency guideline is considered. At first, there was no administration and individuals began developing substantial advantage in the lack of administration which forced legislation to step in.
Although guidelines are far from being extensive, there is effort from the South African Reserve Bank and other participants to figure out and actualize some ideal guidelines.
In 2014, the South African Reserve Bank issued a whitepaper which outlined its position and where it stood regarding what it referred to as virtual currencies, or VC, and Decentralized Convertible Virtual Currencies, or DCVCs.
Some of the points which are noteworthy regarding cryptocurrencies from the white paper include, but is not limited to:
- The fact that cryptocurrencies are not seen as a legal tender such as the notes and the coins which are officially issued by a bank.
- The SARB, however, does not have any objection to the use of DCVCs which means that cryptocurrencies can be traded, exchanged, and mined without any legal implications, and
- DCVCs are recognized as a store of value which means that cryptocurrencies have the potential to be converted to legal tender in the same way that gift cards and vouchers are received but not as a legal form of payment.
Following the whitepaper, in December 2018, the South African Reserve Bank published a review of the National Payment Systems Act, 78 of 1998 pertaining to payment settlement, and the SARB has, reportedly, undertaken to complete overhaul of present regulations by 2025.
This involves the fact that SARB recognises the possible existence of the little difference which exists between domestic and international payments and sees the possibility of similar digital currencies which may be positioned at the heart of national payment systems in the near future.
Should this happen, it has the potential of paving the way for great reduction in how commercial banks are exclusively processing payments and it may also lead to the possibility of a digital South African fiat currency.
How to obtain legal recourse
The SARB has explicitly warned the public against cryptocurrencies as they do not possess legal status or a regulatory framework. Transactions which involve cryptocurrency can therefore pose numerous risks to the user.
One of these is the sheer lack of security guarantees and challenges which are faced with the conversion of cryptocurrencies. SARB stated that it does not regulate virtual currencies and it is the user’s own risk when they are used.
Therefore, there is currently no recourse. Authorities have distanced themselves from such, indicating that it is an individual’s own responsibility to decide whether they want to risk using cryptocurrencies.
Should there be any issues experienced when trading or exchanging cryptocurrencies, traders and investors do not have any backing from SARB or any other regulatory bodies.
Despite this, there are, however, plans to regulate cryptocurrencies in South Africa but this may take some time still as SARB tests several regulations which regulate to Bitcoin and cryptocurrency, as a whole.
Project Khokha
Project Khokha was launched in 2018 and the goal of it is for South Africa to contribute to global initiatives involved with the assessment on the application as well as use cased of distributed ledger technology, or DLTs.
The initiative ran on a platform which is based on Ethereum. The technology was developed by a blockchain company, Consensus, in collaboration with Quorum. The main objective behind the project was to replicate the South African Multiple Gross Operation Settlement System, or SAMOS, which was long overdue for a substantial overhaul.
Project Khokha was combined with DLT which aids in speeding up transactions while simultaneously reducing overhead costs.
In its third month of testing, Project Khokha received an award for the ‘Best Distributed Ledger Initiative’ ward in Singapore. Not only is Project Khokha a proof-of-concept interbank payment and settlement system which is purely based on the blockchain associated with Quorum.
In addition, Project Khokha is also the first initiative in Africa which is blockchain-based, and which received global recognition.
In testing the project, Project Khokha had the backing and the support of eight banks namely Discovery, FirstRand, Nedbank, and five other banks. The project trial was a success but there has not been any further information regarding the commercialization thereof.
Although no other news was provided on Project Khokha, earlier in 2025, South Africa’s top financial regulators in addition with the SARB, jointly released a policy paper which contained thirty recommendations associated with the regulation of cryptocurrency and related service providers.
This is towards ensuring compliance with the Financial Action Task Force, or FATF, which is the money laundering and terrorist financing watchdog on a global scale.
Contained in the paper are specific recommendations associated with the development of a regulatory framework concerned with cryptocurrency assets including suggestions regarding the required regulatory changes which must be implemented.
The first of these recommendations ensures that there is compliance with the rules that have been set by the FATF as described in the guidance provided associated with crypto assets as well as crypto asset service providers, or CASPs.
These CASPs include the following:
- Cryptocurrency trading platforms
- Crypto ATMs
- Issuers of tokens
- Fund and derivatives service providers
- Custodial wallets, and other related custodial services, and more.
CASPs will be subjected to registration with the Financial Intelligence Centre, or the FIC as it is regarded as an accountable institution which complies with both AML and CFT requirements.
There have also been proposals made that the Financial Sector Conduct Authority, or FSCA, become the authority responsible for the licensing of services which relate to both the buying and the selling of cryptocurrency assets.
Can regulations which are put in place work?
When considering the decentralized nature of cryptocurrency, it would never be possible to regulate it as it is not based in one location, nor is it a singular entity, it is spread across the globe in a massive network which connects millions of users.
However, where cryptocurrency in South Africa is concerned, there is still a predominant self-regulatory approach while SARB and other participants finetune the regulation that is coming into effect.
Regulations may have a negative consequences on the growth and the innovation of the cryptocurrency industry which may hinder the development thereof. In addition, technology is moving at an extremely fast pace and may have changed and evolved by the time regulation and laws have been enforced, which will require updates to stay on par with development.
How can traders and investors further ensure the safety of their funds when trading or exchanging cryptocurrency?
Cryptocurrency trading may be daunting to many who have never had exposure to it, even to those who are more advanced in trading other financial instruments.
Apart from regulation, it is still important to consider that there are numerous other risks that traders and investors face when trading or exchanging cryptocurrencies regardless of whether they do it through a broker or a crypto exchange platform.
Traders and investors need to ensure that they conduct thorough research as there are scams and illicit companies and malicious individuals spread across the internet. It requires extensive research to ensure that an exchange or a broker is as legit as they appear.
When trading or exchanging cryptocurrencies, making sure that extra security protocols are in place, goes a long way. Regulations will not stop hacking attempts or security threats, so traders and investors need to ensure that they are thoroughly protected.
By making use of security measures such as 2FA, Google Authenticator, and other valid security applications, traders and investors can make sure that both their funds and personal information is protected.
When trading or exchanging, it is imperative to ensure that funds are not located in an online wallet or left on an exchange.
Traders and investors are strongly urged to keep the majority of their funds in a cold, offline wallet or a hardware wallet and to only transfer adequate amounts as they need it to a hot, online wallet.
Conclusion
The popularity surrounding cryptocurrency is only increasing as time wears on, and South Africa may be a little more behind on regulating the processes associated with it, as Cryptocurrency itself cannot be regulated in its entirety, but more provision is being made to accommodate it.
With recommendations in place on regulations, it will hopefully provide South Africans with some recourse in addition to allowing for the space which is needed for cryptocurrency to continue growing and to allow for South Africa to keep up and not fall behind the rest of the world as it moves onward and forward into a more digitalized era.
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