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Johannesburg – South African consumers should be aware of the risks associated with the use of virtual currencies for either transactions or investments.
This warning was issued yesterday by the National Treasury, the SA Reserve Bank (Sarb), the Financial Services Board (FSB), the South African Revenue Service (Sars) and the Financial Intelligence Centre.

“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,” Treasury said in a statement.

“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.”

Accordingly, Treasury strongly advises the South African public to consider the risks when evaluating undertakings involving virtual currencies.

“The relevant authorities will continue to monitor and assess the use of virtual currencies and consult with private sector stakeholders in this regard,” Treasury said. “Further guidance or regulations may be issued, should the need arise.”

A virtual currency is a unit of account that is digitally or electronically created and stored.

Members of the virtual community agree to accept these units as a representation of value in the same way that currency is accepted.

In contrast to traditional currencies, virtual currencies operate without the authority of central banks, and are therefore not regulated.

Examples include Bitcoin, Darkcoin, Peercoin and Feathercoin. A virtual currency such as Bitcoin allows users to purchase goods and services without using a government backed currency so long as participants are willing to accept Bitcoins as a form of payment.

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.

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.-Fin24.