Central Bank of South Africa Rejects the ‘Currency’ Status to Cryptocurrencies

The central bank of South Africa called the South African Reserve Bank (SARB) says that the digital currencies should be merely called as ‘cyber-tokens’ instead of currency as they do not ‘meet the requirements of money’.

This decision comes at a time when the regulatory bodies from around the globe have turned very active on deciding the role of digital currencies in the global financial system. Francois Groepe, the Reserve Bank Deputy Governor, said that as virtual digital currencies do not have a stable unit of value, it will wrong to term them as “cryptocurrency”.

However, the South African Reserve Bank (SARB) is yet to formulate any specific policy or a regulatory framework regarding digital currencies. But the latest outlook of the duty governor shows that it might be soon in the making.

Bloomberg quoted Francois saying: “We don’t use the term ‘cryptocurrency’ because it doesn’t meet the requirements of money in the economic sense of the stable means of exchange, a unit of measure and a stable unit of value…We prefer to use the world ‘cyber-token’.”

Earlier this year in January, the central bank has already formed a FinTech task force in order to study digital currencies, Last month in April, the central bank also formed a self-regulatory body that can review and outline a regulatory framework for the digital currency sector. While revealing the currency status of the FinTech unit on digital currencies, Groepe said: “We want to ensure or establish whether there is still compliance with the relevant financial surveillance or exchange-control regulations.”

Bridget King, the central bank’s practice director said that the digital currencies are not suitable for the traditional centralized supervision as provided to the banks and the overall financial sector. He further stated that: “[S]elf-regulation through self-regulatory organizations (SROs) may be a more likely solution for the regulation of cryptocurrencies.”

The Central Bank is also said to have issued a guidance in reference to the buying and transfer of digital currencies. The regulator also said that it is wrong for people to use international exchanges to buy and sell digital currencies.

In another crackdown in April 2018, the South African Revenue Service (SARS), said that investors will have to pay income tax for transacting virtual digital currencies. Apart from investors or holders, the tax will also be applied to revenue generated through other cryptocurrency activities like mining or trading.

Earlier this year, Bank of England governor Mark Carney stated that Bitcoin failed to establish itself as a digital currency.

Moreover, there are many other countries like the U.S, Israel and much-recently India who have proposed for the cryptocurrency tax on trading and other associated activities.