Image result for something to know about cryptocurrency

I would like to share with you what I read in a news letter …..

  • Volatility: The volatility of cryptocurrencies is much higher than any traditional market and can be attributed to various factors like news, publication of algorithms, updating of technology, technical analyses and much more.
  • No regulation: Cryptocurrencies are currently unregulated in South Africa. Thus they pose a number of risks for those who choose to transact with them, such as the lack of guarantee of security, convertibility or value.
  • Irreversibility of transactions: Unlike traditional trades, if you deposit money into an incorrect address, there is no way of reversing that transaction. Your money will be lost – and there is no governing body that can assist in getting the money back.
  • Hacking: Cryptos are generally stored in a virtual wallet called a “software wallet”. These wallets are susceptible to hacks. Using a “hardware wallet” is presumed to be a safer wallet option, but even this doesn’t mitigate the risk of hacking.
  • Government rejection: If you invest in cryptos and the government decides to reject them, you risk having your wallet shut down and being unable to migrate your money.
  • Tax implications: In some countries, including South Africa, tax laws are retrospective, meaning that they can apply to money you have earned in the past – leaving you with large tax obligations.
  • Legal tender: The South African Reserve Bank governs the management of currency and has the sole right to issue coins and notes, which constitute legal tender. Bitcoin, for example, falls outside of the definition of legal tender. Consequently, payments made via Bitcoin in South Africa may not discharge a debtor of a monetary obligation and purchasers run the risk that their Bitcoin payments are not recognised by South African law.
  • Money laundering: Bitcoin users remain largely anonymous. This makes it ideal for money laundering and for use in illicit activities such as purchasing illegal substances.

In September 2014, National Treasury issued a user alert advising investors in virtual currencies to exercise extreme caution. In line with this guidance and taking into account the significant risks and uncertainties posed by these cryptocurrencies, the unregulated environment and the speculative behaviour observed in markets, Liberty financial advisers should steer clear of advising clients to invest in any cryptocurrency.

Virtual currencies currently have no legal status and are neither defined as securities in terms of the Financial Markets Act nor as financial products in terms of the Financial Advisory and Intermediary Services Act. They are therefore not subject to the regulatory standards that apply to the trading of securities or the regulatory standards that apply to the provision of intermediary services and advice.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s