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The South African Reserve Bank Will Offer No Protection for ICO Investors

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In light of the recent ban of initial coin offerings in China and the announcement of ICO regulations in the US, Russia and Hong Kong, the South African Reserve Bank publicly announced its views on the status of initial coin offerings (ICOs) in South Africa.

No protection for consumers who invest in ICOs

In a statement to the news outlet VentureBurn, a spokesperson for the South African central bank said:

“In South Africa, cryptocurrencies are not guaranteed by the SARB (SA Reserve Bank), hence offer no recourse or protection to consumers thereof,” which includes newly issued coins that have sprung out of initial coin offerings.

In other words, should you suffer a loss from investing in an initial coin offering (also known as crowdsale or token sale) as a South African resident there is no legal recourse that you can take to recuperate your funds as initial coin offerings are not regulated by the South African Reserve Bank.

Initial coin offerings are a new form of startup financing that involves the sale of a new digital token to early backers of the project. The new tokens are usually bought using existing cryptocurrencies such as bitcoin (BTC) or ether (ETH) during a two to four-week crowdsale period and then become tradable on digital currency exchanges such as Bittrex or Poloniex.

Good news for South African blockchain startups

While the SARB’s statement may sound daunting for investors who are interested in this hot new area of the cryptocurrency market, this is, in fact, good news for South African tech startups as it suggests that the central bank has no intentions of banning or restricting ICOs in any way.

Given the country’s flourishing bitcoin startup scene, it would not be a surprise to see several South African blockchain projects launch their own token sales in the near future.

This is also good news for South African cryptocurrency investors who are looking at the ICO market as an excellent opportunity to diversify their crypto asset holdings.

While some of the best performing ICO tokens (such as IOTA, NEO, and Stratis) have generated a return on investment of over 50,000 percent since their launch, it is important to note that there are also a lot of scams and mediocre projects issuing new digital tokens through ICOs. Hence, it is important to conduct thorough due diligence on the initial coin offerings you are considering investing in to ensure that you are making a smart investment decision. ICO investments are high risk/high return and should, therefore, only make up a small part of your overall cryptocurrency portfolio.

Tags : regulationssouth africa
Alex Lielacher

The author Alex Lielacher

Alex is the founder and editor-in-chief at BitcoinAfrica.io. He is a former investment banker who has been following bitcoin and blockchain technology since 2011. Prior to launching BitcoinAfrica.io, he has been contributing to leading bitcoin publications such as Bitcoin Magazine, CryptoCoinNews, and BTCManager.