In addition to new legislation to combat cybercrime, South Africa is becoming increasingly active in cryptography, with plans to introduce new regulation of cryptocurrencies and potentially launch a cryptocurrency issued by the central bank. Learn more about the recent developments in e-commerce in South Africa in our article.
New Cybercrime Act as of December 1, 2021:
An important e-commerce law has been passed to deal with digital crimes. With effect from 1 December 2021 through the enactment of the Cybercrime Act, cybercrime is a criminal offense required in South Africa. The following are examples of such crimes:
- Hacking: illegal access and interception of data;
- Ransomware: unlawful acts with respect to software and hardware with intent to benefit;
- Cyber fraud, forgery and extortion;
- Intangible property theft (unlike real estate, which is the crime of common law theft);
- Communications of malicious data messages, such as defamatory or vindictive communications.
An especially notable provision gives SA courts extraterritorial scope if cybercrime is committed outside SA.
E-commerce notices issued by the Financial Sector Conduct Authority
SA’s financial regulator, the Financial Sector Conduct Authority (FSCA), continues to regularly issue warning notices to consumers. In relation to online retailing and consumer protection, consumers have been warned to act with caution when using the financial services of certain providers. In addition, it is crucial to check whether the financial services provider is registered with the FSCA to provide financial advisory or intermediation services and, if so, what is the category of such registration. (In other words, is the financial service provider licensed to provide the specific services offered?)
The FSCA has issued a number of warnings regarding online financial services over the past six months, including the following:
- A bitminer trading in cryptocurrencies and cryptocurrency mining offered unrealistic returns and was not registered with the FSCA (and therefore was not licensed to provide financial advisory and brokerage services).
- An online trading platform from India has sought out clients in SA to invest. The FSCA found that they were acting to the detriment of those customers.
- One entity used a WhatsApp group to solicit investments from group members in SA, promised unrealistic and excessive returns, and in addition was not authorized by the FSCA.
SA legislation requires that financial advisory and intermediary service providers be registered with the FSCA and provide only those services that fall into the category for which the license was issued.
Proposed regulation of cryptocurrencies
SA is in the process of drafting amendments to several laws, such as the Financial Advisory Services and Intermediaries Act (FAIS Act), the Financial Intelligence Centers Act (FICA, which is similar to the Know Your Customer requirements), the Act of Financial Markets, etc. .
The result of these changes will establish a regulatory framework for cryptographic assets, cryptographic platform service providers, etc., as well as address gaps in the SA regulatory framework for AML / CFT.
The changes were planned for the first half of 2022, but to date there has been no movement. Investments related to cryptocurrencies are not currently regulated by the FSCA or any other body in SA, although the revenue service requires the taxpayer to report income earned and capital gains.
Digital currency of the Central Bank of Africa
Most of Africa’s various central banks, as well as central banks around the world, are looking to issue digital currencies from central banks (CBDCs). Fiat money is still widely used in Africa, due in part to the number of people in many African countries who do not have a bank account, as well as the limited reach of commercial banks. When it comes to e-commerce, this is another problem, along with a lack of logistics or poor logistical support that simply does not allow e-commerce to flourish as it does in the developed world, where you can buy goods online, track online and fast and efficient delivery.
Last year, Ghana and Nigeria launched pilot programs for their CBDCs, e-Cedi and eNaira, respectively, with both countries still developing platform software for currencies. South Africa has conducted a feasibility study to use CBDC as an electronic tender for general retail and complementary use of cash. Under the Dunbar project, the SA central bank together with the Bank for International Settlements have completed a prototype system that allows for international settlement through CBDC. Other participants in this project were the central banks of Australia, Malaysia and Singapore. The prototype system allows direct CBDC transactions between institutions with a reduction in time and cost.
Implementing CBDC in Africa will reduce banking costs, eliminate intermediaries, and greatly improve connectivity (given the huge growth in mobile phone and app usage in Africa). With the push for the African Continental Free Trade Agreement to develop the digital economy with regard to cross-border trade, CBDCs could play an important role in promoting e-commerce in African cross-border trade.
Copyright Amendment Bill
A new copyright bill is currently going through the final stages of the legislative process. The bill brings very significant and quite controversial changes to SA’s copyright laws and will be of great concern to content providers and copyright owners. We are overseeing the legislative process and once it is completed, you can expect our detailed report on the impact of these new changes on SA’s copyright laws.