Consumer protection in the realm of decentralised virtual currencies: a comparative analysis of South Africa and Kenya’s regulatory approaches

Abstract

Innovations in technology have evolved in different fields that exist. The financial world has witnessed a disruption introduced by virtual currencies such as Bitcoin, Litecoin and Ethereum. They have emerged as digital representation of financial value alongside fiat currencies. Virtual currencies operate on blockchain technology, allowing for peer-to-peer transactions without central government intermediaries, such as central banks. Despite their increasing popularity in Kenya, the decentralised nature of these virtual currencies has posed a great challenge in terms of consumer protection and in terms of investment security. The study’s aim is to investigate the risks and regulatory challenges posed by virtual currencies, by comparing the approaches adopted by Kenya and South Africa. The interest of the comparison is that both countries have had the need to find a regulatory solution in order to mitigate the risks that come with DVCs. This study will use the conceptual framework called the libertarian- public interest. The choice of the concept is determined by the fact that it combines the libertarian idea of disruptive innovation and public interest, which is the foundation of consumer protection. Through a qualitative, desk-based methodology, the study will analyse the distinct nature of decentralised virtual currencies, including their major characteristics such as anonymity and fraud risks. The study will use data from primary sources such as the Constitution of Kenya to relay the rights of consumers, and the various statutes of the selected countries under the scope of approach and decisions of courts in matters related to disruptive technology. Further, the study will utilise the secondary sources such as books, scholarly articles, reports from renowned financial organisations and research papers to bring out the general approaches. The research hopes to demonstrate the appropriate regulatory approach that would balance the disruptive nature of DVCs and the protection of its consumers.