SARB – Idelto

SA Central Bank Comes Up With Another Nickname for Cryptos – “Cyber Tokens”

Cryptocurrencies don’t meet the requirements of money, according to the South African Reserve Bank which has decided to call them by a different name. It’s one that does not imply either currency or cryptography. “We prefer to use the word ‘cyber-token’,” said a high-ranking official of the central bank in Pretoria, adding another entry into a long list of substitutes favored by financial authorities over the original term.

Also read: The Government Dilemma: How To Tax Something One Pretends Does Not Exist

Cyber Tokens – But Why?

It’s not unusual for officials around the world to refrain from uttering the word. For many of them, “cryptocurrency” probably sounds like a bad omen. Central bankers are the worst – “crypto” is usually a “no-no” in their financial vocabulary. But the spread of cryptocurrencies has forced policy makers and government experts to demonstrate some linguistic ingenuity. Many now speak more and more often about them with artificially invented synonyms. The list of generic terms is growing and we owe the latest entry to the South African Reserve Bank.

“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,” the central bank’s Deputy Governor, Francois Groepe, told reporters in Pretoria this week. “We prefer to use the word ‘cyber-token’,” he added, quoted by Bloomberg.

The popularity of cryptocurrencies has been growing exponentially around the globe and South Africa is no exception. Regulators in the country, like many of their colleagues abroad, are finding it hard to keep up with the pace of crypto progress. SARB has recently set up a special unit tasked to review its position on “private cryptocurrencies.” The main goal is to prepare a policy framework that would lay the foundation for the future regulatory regime to govern the fintech sector.

As part of the discussions on the upcoming crypto regulations, a self-regulatory approach has been proposed by legal experts working with the industry. Whether the SARB team will listen to these calls is yet to be seen. So far, authorities in the country have mostly discussed cryptocurrencies in the context of taxation. In April, the South African Revenue Service announced it expected all crypto gains to be reported by taxpayers. Obviously, the fact that “cyber tokens” like bitcoin are not regarded as currencies is not an obstacle to collecting taxes on their transactions.

A Long List of Nicknames

Government officials and central bankers invent nicknames for cryptocurrency probably because they fear that using the original term would amount to an unwanted recognition of the decentralized digital money. At the same time, they seem to turn a blind eye to the fact that taxation is a recognition of both their existence and their characteristics as means of exchange, unit of account and store of value. Nevertheless, the long list of synonyms continues to grow.

Authorities in Ireland have recently clarified their position on crypto taxation. For the sake of objectivity, the Irish revenue service has referred to digital coins with their real name – cryptocurrencies. Despite that, decentralized cryptos have been denied currency status, with one notable exception – bitcoin is currency only for VAT purposes.

Russia has been preparing its crypto regulations for quite some time. Of the three draft laws that hit the floor of the State Duma this week, only one mentions and defines cryptocurrency directly. In the other texts, and during the preceding discussions, cryptos and tokens have been called “digital money,” “digital financial assets,” “digital rights,” “other property,” “electronic property,” “money surrogates,” and what not.

“Virtual currency”, however, remains by far the most popular generic term among politicians and financial officials around the world. It has been used in place of the colloquial and original “cryptocurrency” in countries, unions, and organizations, including the US, the EU, the IMF, Mexico, Malta, the Philippines, and many more.

Why do you think government officials and central bankers avoid using the term “cryptocurrency”? Share your thoughts on the subject in the comments section below.

Images courtesy of Shutterstock, Bitun.

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Premature Regulation Throttles Growth

Crypto Self-Regulation Deemed a Likely Solution in South Africa

The South African Reserve Bank (SARB) has set up a team to monitor fintech developments and assist its efforts to finalize the regulatory regime for cryptocurrencies. Representatives of the private sector have proposed the creation of a Self-regulatory Organization (SRO). While banking falls within the central bank’s jurisdiction, cryptos are not suited to traditional centralized supervision, said a legal expert familiar with the matter.

“Regulation through self-regulatory organizations may be a more likely solution,” Bridget King, Finance and Banking Practice Director at a leading South African law firm, told the Business Report. The SRO can be registered as a non-governmental body authorized to adopt rules, issue directives for its members and implement industry standards, she explained.

Mrs. King believes that the central bank should deal with preventing systemic risk, while the SRO can establish a self-regulatory approach in the fintech sector. She warned that regulating cryptocurrencies prematurely could throttle growth and innovation in the industry:

If laws are drafted based on existing technology, which is still in its growth phase, there is a risk that the technology may have moved so much by the time the legislation is enacted, that this legislation is obsolete or requires updating almost immediately.

Bridget King noted, however, that this approach would have to be balanced against what she called the dangers of delaying the regulatory framework too much.

While mulling over crypto regulations, SARB has been exploring opportunities to implement distributed ledger technologies in electronic payments. It also experiments with replicating interbank clearing and settlement using the Quorum protocol, a permissioned implementation of ethereum.

Bitcoin Growing Popular with South Africans

Meanwhile, cryptocurrencies with permissionless blockchains, like bitcoin, have been steadily gaining popularity in South Africa. Trading has increased significantly, so has the use of cryptocurrencies as a means of payment. Last year, the country’s second largest supermarket chain Pick n Pay started testing bitcoin payments. It has been reported that South African drivers can now pay their tickets with cryptocurrency.

In December, the South African Revenue Service announced it was exploring ways to tax bitcoin trading, as news.Bitcoin.com reported. The agency held talks with tech companies to implement transaction tracking solutions. The tax authority also revealed it was working closely with the central bank to improve the monitoring of cross-border money flows.

This year, the South African Reserve Bank created a fintech task force to review its stance on cryptocurrencies. It is also supposed to update the official monetary policy and address the stability of the country’s financial system.

Do you think that self-regulation is more effective in the crypto sector? Share your thoughts in the comments section below.

Images courtesy of Shutterstock.

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