This is according to a joint statement released by the National Treasury, the South African Reserve Bank, the Financial Services Board, the South African Revenue Service and the Financial Intelligence Centre.
“Virtual currencies are becoming increasingly popular among users to purchase goods and services, to transfer to another person, for personal use or to hold as an investment. While there are benefits associated with this new technology, it is difficult to assess those benefits against the risks of something so novel, innovative and technologically sophisticated,” said the statement.
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“Users of virtual currencies can therefore become susceptible to fraudulent or any other criminal behaviour as they may be less circumspect than usual when faced with the promise of high-return investment opportunities.”
The group defined a virtual currency as a unit of account that is digitally or electronically created and stored. Virtual community members accept these units as a representation of value the same way that any other currency is accepted. However, unlike traditional currencies, virtual currencies do not operate on the authority of central banks and are not regulated.
Bitcoin, a software based online payment system, has become one of the most popular and widely used virtual currencies to date. Bitcoin allows users to purchase goods and services worldwide without using a government-backed currency.
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Bitcoin uses a decentralised system whereby all transactions are managed by the network and not by a bank, and can also be exchanged or bought with real currency.
“Currently in South Africa there are no specific laws or regulations that address the use of virtual currencies. Consequently, no legal protection or recourse is afforded to users of virtual currencies,” continued the statement.
“Due to their unregulated status, virtual currencies cannot be classified as legal tender as any merchant may refuse them as a payment instrument without being in breach of the law. In addition, virtual currencies cannot be regarded as a means of payment as they are not issued on receipt of funds. The use of virtual currencies therefore depends on the other participant’s willingness to accept them.”
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The group therefore recommends that users conduct thorough research about investment offers or payments involving virtual currencies before committing to any transactions.