NEWS
04/04/2018 10:30 SAST | Updated 04/04/2018 10:32 SAST

Reserve Bank Sets Up Task Team To Investigate Cryptocurrencies

The Reserve Bank is looking at ways to regulate the fraud-hit industry in its infancy.

Dado Ruvic / Reuters

The South African Reserve Bank (SARB) will set up a task team to monitor cryptocurrencies and FinTech developments, as it plans to establish proper policy and regulatory frameworks, according to Business Report.

Cryptocurrencies, or digital currencies designed to work as a medium of exchange, generally operate outside of central banks. Concerns have been raised, however, about the unregulated medium, as it appears to be increasingly vulnerable to fraud.

In March, 27,500 people across the globe, many of them South Africans, fell victim to one of the largest bitcoin scams, TimesLive reported. The Hawks confirmed an investigation into bitcoin company BTC, which thousands of people used to invest cryptocurrency. An amount of about $50-million [~R593-million] was thought to be involved.

Bitcoin.com reports that an estimated $23-million [~R273-million] per day is stolen through cryptocurrency scams. About R16-billion has reportedly been lost this way so far this year.

On Tuesday, Twitter started banning cryptocurrency adverts, according to Eyewitness News (EWN), following in the footsteps of Google and Facebook. Facebook has reportedly restricted crypto-related ads, while Google will enforce a total ban starting in June.

Zennon Kapron, director of the financial consultancy Kapronasia, told Reuters that it is an "impossible task" for anyone, much less Twitter and Facebook, to keep tabs on whether specific cryptocurrencies are fraudulent or genuine.

Although advertising from cryptocurrency traders must have created huge revenue for the platforms, the risk associated with promoting fraud wasn't worth the risk, he reportedly said.

Google Chrome is also trying to fight cryptocurrency fraud by announcing this week that it will no longer accept extensions that mine cryptocurrency, MyBroadband reported. Google reportedly said that 90 percent of all extensions with cryptocurrency mining scripts have failed to comply with its policies.

And this week, the U.S. Securities and Exchange Commission (SEC) laid charges over a fraudulent cryptocurrency fundraiser promoted by boxer Floyd Mayweather and rapper DJ Khaled, AFP reported. The celebrities are not accused of operating the scheme, however – which reportedly raised more than $32-million [~R380-million] from investors. The company concerned, Centra Tech. Inc., was charged with violating anti-fraud laws.

Cliffe Dekker Hofmeyr finance and banking practice director Bridget King told Business Report that cryptocurrencies were not suited to traditional centralised supervision. She added that regulating cryptopcurrencies prematurely could strangle innovation in the industry.