In addition to new legislation to combat cybercrime, South Africa is becoming increasingly active in the crypto arena, with plans to introduce new crypto-asset regulations and potentially to roll out a crypto- currency issued by the central bank. To learn more about recent e-commerce developments in South Africa, check out our article.
New law on cybercrime as of December 1, 2021:
A major e-commerce law has been passed to combat digital offences. Since December 1, 2021 and the enactment of the Cybercrimes Act, cybercrimes are enforceable criminal offenses in South Africa. The following are examples of such crimes:
- Hacking — the illegal access and interception of data;
- Ransomware – illegal acts involving software and hardware with the intent to profit;
- Cyber fraud, forgery and extortion;
- Theft of intangible property (as opposed to real property, which is the common law offense of theft);
- Communications of malicious data messages, such as defamatory or vengeful communications.
A particularly notable provision gives SA courts extraterritorial reach if cybercrimes are committed outside of SA.
E-commerce warnings issued by the Financial Sector Conduct Authority
South Africa’s financial regulator, the Financial Sector Conduct Authority (FSCA), continues to issue regular warnings to consumers. With regard to online retail and consumer protection, consumers have been warned to exercise caution when using financial services from certain providers. In addition, it is essential to check whether the financial service provider is registered with the FSCA to provide advisory or financial intermediation services and, if so, what is the category of this registration. (In other words, is the financial service provider authorized to provide the specific services offered?)
The FSCA has issued a number of warnings about online financial services over the past six months, including the following:
- A bitminer trading cryptocurrencies and cryptocurrency mining offered unrealistic returns and was not registered with the FSCA (and therefore was not licensed to provide financial advisory and intermediary services).
- An Indian online trading platform sought clients in South Africa to invest. The FSCA found that they were acting to the detriment of these customers.
- An entity used a WhatsApp group to solicit investments from group members in SA, promised unrealistic and excessive returns, and was furthermore not licensed by the FSCA.
South African law requires providers of financial advisory and intermediary services to be registered with the FSCA and only provide services that fall within the category for which they have been licensed.
Proposal for regulation of crypto-assets
SA is in the process of drafting amendments to various laws, such as the Financial Advice and Intermediary Services Act (FAIS Act), the Financial Intelligence Center Act (FICA – which is similar to the Know Your Customer requirements) , the law on financial markets, etc. .
The outcome of these changes will establish a regulatory framework for crypto-assets, crypto platform service providers, etc., as well as fill the gaps in the SA regulatory framework for AML/CFT.
The changes were expected in the first half of 2022, but so far there has been no movement. Crypto-related investments are not currently regulated by the FSCA or any other SA body, although the Revenue Department requires income earned and capital gains to be reported by the taxpayer.
African Central Bank Digital Currency
Most of the different central banks in Africa, like central banks around the world, are planning to issue central bank digital currencies (CBDCs). Fiat currency is still widely used in Africa, in part due to the number of individuals in many African countries who do not have bank accounts, as well as the limited reach of commercial banks. When it comes to e-commerce, this is one more problem, alongside the lack of logistics or poor logistical support that simply doesn’t allow e-commerce to thrive as it has in the developed world, where goods can be purchased online, tracked online and delivered quickly and efficiently.
Last year, Ghana and Nigeria launched pilot programs for their CBDCs, e-Cedi and eNaira respectively, with both countries still developing the platform software for currencies. South Africa has completed a feasibility study on using the CBDC as an e-tendering for general retail use and complementary to cash. As part of the Dunbar project, the South African central bank and the Bank for International Settlements have developed a prototype system enabling international settlements using the CBDC. Other participants in this project were the central banks of Australia, Malaysia and Singapore. The prototype system enables direct CBDC transactions between institutions with reduced time and cost.
The implementation of CBDCs in Africa will result in reduced banking costs, the removal of intermediaries and a vast improvement in connectivity (given the huge growth in the use of mobile phones and applications in Africa). With the drive under the African Continental Free Trade Agreement to develop the digital economy with respect to cross-border trade, CBDCs could play a major role in promoting e-commerce in cross-border trade by Africa.
Copyright Amendment Bill
A new copyright bill is currently going through the final stages of the legislative process. The bill makes very significant and rather controversial changes to SA copyright laws and will be of major concern to content providers and copyright owners. We monitor the legislative processes and once they are completed, you can expect our detailed report on the impact of these new changes in SA copyright laws.