LIOP 3724

OCTOBER JOURNAL
2017189487
SIVUYILE MILISI

“Like the real world, the digital one too is populated by utopists and realists”. These
are the words of Katharina Pistor. To understand what this statement means and to
actually find an individual sided stance in it, one must first understand what a utopist
and realist are.

The Oxford dictionary gives the following definitions for what a realist is or means:
“person who accepts a situation as it is and is prepared to deal with it accordingly”
and “an artist or writer whose style is characterized by the representation of people
or things as they actually are.” In the digital sense with regards to cryptocurrencies,
realists make it clear that cryptocurrencies such as bitcoin for example simply cannot
be used for conventional payments but can be used for the immutable and final
discharge for substantial obligations. Personally in my opinion, it is clear that there is
still room for future development in the mindset of realists to broaden out their scope
of cryptocurrency market capabilities.

The word ‘utopist’ by definition can be described as follows: ‘of or relating to a

perfect or ideal existence’. This definition allows for a much wider view of what is to
be or can be of a situation, circumstance or thing. In the digital sense with regards to
cryptocurrencies, utopists believe that the digital code can create conditions for the
perfect market to exist. I stand in support of this position and would identify as a
utopist in this regard. I say this because many ‘middle-men’ such as big banks,
corporations and institutions can be cut out in digital transactions when using this
form of instrument of payment, this can result in a lot of costs being cut down for
individuals, easier access to suppliers and a more confidential and secure channel
for transactions is made available. A new digital platform can be created for
information to be entered, transferred or created via the blockchain channel. This
can result in a more self efficient society where self governance is a norm world wide
and the abuse of power is eliminated. The statements made in this paragraph are
further supported by Vivienne Lawack who writes that “Cryptocurrencies are created
over the internet by using open-source software on a peer-to-peer network. This
enables direct transaction from one person to another so eliminating the need for
intermediaries such as a financial institution or a central bank”. She further mentions
that cryptocurrencies are not recognised as a legal tender in any jurisdiction as their
function is directly in contrast to the traditional financial system.

From the perspective of a utopist, the digital code when compared to the legal code,
relieves people from regulations that can be abused, misused and fundamentally
adapted to function in favour of those in power as the digital code itself does not
depend on authority/power and knows no territorial or jurisdictional borders. The use
of the digital code allows for further equality as all members who make use of
cryptocurrencies as an instrument of payment are bound by the same rules across
all platforms. This does however require savvy coders who can maintain the
blockchain with code that needs to be written, updated and fixed when issues such
as bugs interfere and this may result in manipulation of the system hence there
being a need for regulation in how code may be written and updated so that the
digital code itself may become a system of self regulation once developed.

In a South African context, cryptocurrencies have no regulatory intervention. Despite

the global use of them, this is the case for the rest of the world. This is mainly due to
the decentralised nature of cryptocurrencies. This is a characteristic of
cryptocurrencies that most utopists are in favour for as the digital code grows bigger
and bigger while gaining more and more traction but not all countries are happy with
this idea. Vietnam has completely prohibited the use, issuing and mining of
Cryptocurrencies. However, more countries such as Canada haves previously
passed bills (such as Bill C-31 — amendments made to the Proceeds of Crime
(Money Laundering) and Terrorist Financing Act) that address cryptocurrencies, their
exchange and payment processes that are yet to be enacted. If we look at bitcoin on
it’s own as a cryptocurrency and how it has affected South Africa’s legal code, we
realise that there is no way to trace user information on the blockchain but however
there are exchanges like Luno that use their customer information to remain
compliant with the Financial Intelligence Centre Act 1 of 2017 and practice due
diligence to maintain standards and implement KYC (know your customer) which
makes it possible to track user information in transactions on the blockchain by
tracing users wallet ID’s to their profiles.

It is such implementations and developments that make utopists believe that a

perfect market can exist but regulation must be controlled by the market economy
itself. It is of no use to expect a globally traded instrument of payment such as
cryptocurrencies to remain pseudonymous in execution and have individuals who
live by state and international laws participating in those state economies daily not
abide by some kind of regulation when it comes to such transactions. It is with the
mindset of growth that utopists invite these legal implementations, not
enforcement’s, to not completely dissolve legal code to result in a balance of order.

The South African Reserve Bank which is the National payment system department
realises this and makes recognition for centralised non convertible virtual coins like
Q Coins. It is the decentralised convertible virtual coins which it cannot make proper
recognition for as DCVCs remove central banks/ monetary authorities, commercial
banks and licensed money remitters from the payment process. This is the control
which is given to users of cryptocurrencies that regulators, institutions and central
banks have no access to due to the privacy created through the blockchain. With this
in mind we once again, see the development of a growing digitally coded world
despite the contrasting positions of the legal code and digital code and the utopists
and realists.