The impact of cryptocurrencies on the general powers and duties of South African insolvency practitioners

• Author: Singh, S.
• DOI: https://doi.org/10.47348/SAMLJ/v33/i2a6
• Published date: 13 January 2022
• Date: 13 January 2022
• Citation: (2021) 33 SA Merc LJ 289
• Pages: 289-318

THE IMPACT OF CRYPTOCURRENCIES ON

THE GENERAL POWERS AND DUTIES OF

SOUTH AFRICAN INSOLVENCY

PRACTITIONERS

SIDASHA SINGH*

Senior Associate, Cliffe Dekker Hofmeyr

JUANITTA CALITZ**

Associate Professor, Department of Mercantile Law,

University of Johannesburg

Abstract

Within the context of the fourth industrial revolution, cryptocurrencies

pose several challenges in the framework of corporate insolvency law.

In South African law, no statutory framework vis-à-vis crypto-

currencies, such as Bitcoin, currently exists. This has however not

prevented entities from engaging in the cryptocurrency market. The

specific dilemma is that insolvency practitioners do not have legislative

guidelines to assist them in dealing with the subject of cryptocurrencies.

Consequently, international judicial developments must be consulted

and analysed with the aim to close the gap between the legislature and

Industry 4.0. This article unpacks the South African legal position on

cryptocurrencies within the context of the statutory powers and duties

of insolvency practitioners. It engages in an analysis of selected

international courts cases that have dealt with the concept of

cryptocurrencies within the context of insolvent estates and continues

to make recommendations for the development of an efficient and

effective regulatory model.

Keywords: Bitcoin; cryptocurrencies; insolvency practitioner; powers and

duties; insolvency law; Industry 4

*LLB (UKZN) LLM (UJ). This article is partly based on Singh, The Impact of Cryptocurren-

cies on the General Powers and Duties of South African Insolvency Practitioners

(LLM dissertation, UJ, 2020).

** LLB LLM LLD (Pret).

289 https://doi.org/10.47348/SAMLJ/v33/i2a6

(2021) 33 SA Merc LJ 289

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IINTRODUCTION

The steam engines of the eighteenth century, the creation of electricity

during the nineteenth century and the invention of computers and

internet facilities of the twentieth century, ushered in the digital era of

the twenty-f‌irst century, coined as the Fourth Industrial Revolution

(Industry 4.0).

1

As Schwab mentions:

‘We stand on the brink of a technological revolution that will fundamen-

tally alter the way we live, work, and relate to one another.... We do not yet

know just how it will unfold, but one thing is clear: the response to it must

be integrated and comprehensive, involving all stakeholders of the global

polity, from the public and private sectors to academia and civil society.’

2

With reference to Industry 4.0, cryptocurrencies present several chal-

lenges in the corporate insolvency law context. Although

cryptocurrencies, such as Bitcoin, are not recognised as legal tender

under South African law,

3

this has not prevented entities from engaging

in the cryptocurrency market.

4

The general diff‌iculty is that there is no proper legal characterisation

of cryptocurrencies, resulting in insolvency practitioners (‘IP’)

5

being

unable to effectively carry out their duties in terms of the Companies Act

61 of 1973 (1973 Act).

6

IPs are therefore ill-equipped to deal with

1

Schwab, ‘The Fourth Industrial Revolution’ in Encyclopaedia Britannica (Encyclopaedia

Britannica Inc. 2018) 2, available at https://www.britannica.com/topic/The-Fourth-

Industrial-Revolution-2119734, accessed on 26 March 2020; Suri, ‘The Fourth Industrial

Revolution will bring a massive productivity boom’ (2018) 2, available at https://

www.weforum.org/agenda/2018/01/fourth-industrial-revolution-massive-productivity-

boom-good/, accessed on 26 March 2020.

2

Schwab, ‘The Fourth Industrial Revolution: What it means, how to respond’, available at

https://www.weforum.org/agenda/authors/klaus-schwab, accessed on 19 September 2020.

3

The South African Reserve Bank, ‘Position paper on virtual currencies’ (2014) 1,

available at https://www.resbank.co.za/RegulationAndSupervision/NationalPayment-

System(NPS)/Legal/Pages/PositionPapers.aspx, accessed on 10 October 2019 (hereinafter

referred to as the SARB Policy Paper).

4

Intergovernmental Fintech Working Group and Crypto Assets Working Group, ‘Con-

sultation paper policy proposals for crypto assets’ (2019) 7, available at f‌ile:///C:/Users/

sidashan/Downloads/CAR%20WG%20Consultation%20paper%20on%20crypto%20assets

_f‌inal.cleaned%20(3).pdf, accessed on 10 October 2019 (hereinafter referred to as the

Consultation Paper).

5

‘Insolvency practitioner’ is the generic term used in this discussion to refer to a liquidator

and/or a trustee, as the context may require, under South African insolvency law (hereinafter

referred to as IP).

6

While s 224(1) of the Companies Act 71 of 2008 (2008 Act) repeals the 1973 Act, s 224(3)

of the 2008 Act, preserves the transitional arrangements set out in Schedule 5. These

transitional arrangements allow for ch XIV of the 1973 Act to govern the winding up of

insolvent companies. Accordingly, the 1973 Act is applicable, when determining the general

powers and duties of IPs. See Boraine, ‘The application of ‘‘repealed’’ sections of the

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