What The South African Reserve Bank thinks of Bitcoin

“Of late, corporations like Microsoft, Dell and Expedia are amongst a host of corporations that have begun to accept payments in Bitcoin. Central banks of various countries, including India’s Reserve Bank, have acknowledged Bitcoin as a currency of the future.” – cointelegraph

This got me thinking…India is going big on Bitcoin so what about asking suppliers in India if they will accept bitcoin in exchange for their imported products instead of following the often-times cumbersome Forex outward T/T procedures of the banks.

Some banking systems could involve various steps to perform a foreign payment, and onerous document reporting requirements. Such payments could take anything from 15 to 30 minutes to complete. Imagine in a large importing concern paying multiple suppliers daily, how much time could be saved by simply making Bitcoin payments in under a minute each.

The added benefit would be a 10 minute confirmation (clearing) time using Bitcoin opposed to the 2 to 3 day waiting period with the banks from date of outward T/T instruction.

Another benefit is a further layer of anonymity, whereby if you pay via Bitcoin, your bank doesn’t have to receive the details of your supplier and risk having one of their employees disclose such supplier to their family and friends who eventually may land up importing the same thing in competition to you. (These things can happen)

My only concern was whether paying for foreign imports via Bitcoin would be legal and whether one would have to submit reporting documentation like one currently does with bank outward T/T’s over 50 000.00 ZAR in value.

So I asked a friend of mine who is employed by the SARB and we had the following discussion on Facebook:

Friend @ SARB: …I cannot comment on SARB policy in this forum. However, if you go to the SARB website and search on Bitcoin, you will find the position paper which details why Bitcoin is not legal tender in RSA.

My Post in Response: …thanks for your valued feedback.

The Reserve Bank whitepaper ( http://bit.ly/1NvvlVA ) on Bitcoin and Crypto Currencies answered my questions and made for an interesting read. I will summarise it below for anyone who may be interested.

Firstly, it is correct that Crypto Currencies, referred to by SARB as DCVC’s (Decentralised Convertible Virtual Currencies) are in fact not legal tender.

At first glance this sounds like it may be illegal, but that is not true. The definition of legal tender by the SARB are notes and coins issued by a bank (section 3.2.3).

Bitcoin and DCVC’s are not physical currencies and thus fall outside of the definition. (you could print or mint them but it still would would not be legal tender, it can only be such if issued by a bank, so it stands to reason if banks ever issue bitcoin it will become legal tender)

Section 3.2.4 goes on to expand on legal tender, as tender that a creditor is obliged to accept, which is interesting. I suppose a vendor choosing only to accept bitcoin and not local currency, would legally have to find a way to accept such coinage should a consumer demand to pay with local fiat currency.

The SARB has no particular objection to DCVC’s being used, however in section 3.1.1 it recognises DCVC’s as representative stores of value convertible to legal tender, much like tokens or vouchers.

Section 2.1 authorises the use of DCVC’s in trade and exchange – “A virtual currency (VC) is a digital representation of value that can be digitally traded and functions as a medium of exchange, a unit of account and/or a store of value, but does not have legal tender status”

Interestingly SARB recognises in section 2.4 that “…there is potential for real growth of Bitcoin in its current operational environment”

In relation to my import payment reporting question it is clear that one does not need to report any foreign trade payments made in DCVC’s, even if over R50 000.00, the white paper indicates in section 4.3.5.3 that:

“FinSurv would not be in a position to report on the “flow” of DCVCs because the transactions would not be reported on the FinSurv Reporting System. It follows that payments using DCVCs in respect of imports or the receipt of export proceeds would not be detected and as a consequence FinSurv would not be able to report thereon.”

Also section 4.3.5.2 highlights that “In terms of the Regulations, South African residents are afforded a foreign capital allowance of R4 million per calendar year…should investors choose to acquire DCs in terms of their foreign capital allowance, they do so at their own risk and have no recourse to South African authorities.”

Basically the above means you can use DCVC’s to send funds overseas provided it doesn’t exceeding your annual per person allowance. (Not that greater payment amount from funds already stored as bitcoin could easily be traced, but rather not do it)

Finally, SARB states in section 5.1 “The Bank does not oversee, supervise or regulate the VC landscape, systems or intermediaries for effectiveness, soundness, integrity or robustness. Consequently, any and all activities related to the acquisition, trading or use of VCs (particularly DCVCs) are performed at the end-user’s sole and independent risk and have no recourse to the Bank.”

Therefore SARB is saying – use it if you want, but don’t come crying if for help from the banking system if something happens and you lose money.

I however still believe one will have recourse through the justice system and the courts of law should someone or some company steal your Bitcoin,

Since Bitcoin is a digital asset, representative of value and a belonging of yours, much like for example a casino token before it gets cashed in. If someone steals your casino “chips” from you I’m sure one could take action through the legal justice system for their recovery, and I’m sure the same will apply to Bitcoin and other DCVC’s if you suffer losses in respect of them due to another party.

I hope this was useful to anyone reading this.

Regards,

Ricardo Goncalves
TheCryptoDrive.com

ProTip (BTC): 1ASZGq87sYAXfNHhrFsjizvj7bCV6vi5m8
Ethereum: 0x78e2501d90e92ae5bcb510e12dbcdfd010693e19

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Virtual currency is not legal tender, is not backed by the government, and accounts and value balances are not subject to consumer protections. The information does not constitute investment advice or an offer to invest.