Alarm bells over suspicious cryptocurrency investment schemes are increasingly being investigated by the Hawks.
This has emerged in the wake of the Hawks’ investigation into an alleged R1 billion cryptocurrency Ponzi scheme run by BTC Global, according to a report in the City Press.
“There are others,” said Hawks spokesperson Brigadier Hangwani Mulaudzi told City Press.
He said they were “under inquiry” and could not be named at this stage.
Among the red flags is the offer of financial reward for recruiting new members, or larger payouts for larger numbers of investors in the pool.
Mulaudzi said the BTC Global scheme had affected about 28 000 South Africans from all walks of life.
He said many had lost over R100 000 when the scheme crashed in early February, although “some got lucky” and pulled their money out in time.
Luke Buckland, founder of a private cryptocurrency investment partnership called Cryptocats, told City Press that Bitcoin was great for running a Ponzi scheme. This was because it had global reach, coupled with the promise of riches through technology and was advertised via social media.
“It’s a perfect storm,” said Buckland.
For more read: Bitcoin Ponzis on the rise
Regulators face substantial challenges when evaluating the risks associated with cryptocurrencies.
While cryptocurrencies hold significant promise for economic growth in Africa, there is a strong case for cryptocurrency regulation.
The evolution of cryptocurrencies means there is potential to be “incredibly surgical” in terms of regulation and the enforcement of transparency, but regulators are still facing resource constraints and other limitations in their efforts to get on top of this revolutionary new technology.
This is the view of Professor Andrei Kirilenko, Director of the Centre of Global Finance and Technology at the Imperial College of London.
In 2017July, the South African Reserve Bank (SARB) said it would begin testing cryptocurrency regulations.
SARB is planning to formulate policy frameworks in response to these emerging innovations such as private cryptocurrencies.
The Bank said in a statement earlier this year that it will undertake various initiatives aimed at assisting in the formulation of appropriate policy frameworks for the possible regulation of FinTech.
This review will address regulatory issues such as clearing and settlement risks, exchange control impacts, monetary policy and financial stability, and other matters such as cybersecurity considerations.
Through collaboration with the other regulatory bodies, matters such as tax implications, consumer and investor protection, and money laundering activities will also be addressed, said the bank.
The SARB expects to complete the review in the second half of 2018.
The Bank added that the second aim of the policy framework is to investigate and decide on the applicability of innovation facilitators for the SARB.
‘Innovation facilitators’ is a collective term for innovation hubs, regulatory sandboxes and accelerators.