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Picture: 123RF/PARILOVV
Picture: 123RF/PARILOVV

According to this astonishing Bloomberg story, a little-publicised Durban-based outfit called Africrypt, run by two barely 20-something brothers Raees and Ameer Cajee, has apparently closed down after allegedly being “hacked” some time in April this year.

The thing is, the cryptocurrency platform seems to have scarpered with as much as $3.6bn worth of digital coins in its coffers, according to Bloomberg. At yesterday’s exchange rate, that’s an incredible R51.2bn.

That number, to put it mildly, seems almost fantastical — it amounts to just R5bn less than the entire market value of the Woolworths group, for example.

Almost immediately the doubters congregated on social media. For one thing, Africrypt is anything but a household name, nor does it have what you’d describe as a “presence” on the local crypto-scene.

According to one market source, “there’s general consensus that the number is not just inflated, more like massively over-reported.”

Large, well-known crypto projects, the source told the FM, are generally valued at over $1bn — but the participants in the industry know who the players are in these projects.

Koshiek Karan, founder of Banker X, spoke bluntly about this on Twitter. “Africrypt claimed to have grown from a one-man operation to ‘one of Africa’s largest & most successful AI trading companies’. Ever heard of them? Nobody has. That’s the start of any great scam.”

His thread on the story is entertaining, but it contains one great lesson: “Whether it’s forex, crypto, stocks, commodities ... if anyone ever tells you they [have] figured out a magic pattern to consistently beat the market based on secret technology... Just remember — they’re making money from you, and not for you.”

In other words, if there is no product, youre the product.

Given the frequency of these kinds of crypto-disasters, you can sort of understand the antipathy that central banks and other authorities have for cryptocurrencies — not least because they represent everything that isn’t under central monetary control. And, when the scammers get going, the numbers can be vast and the recourse nonexistent.

According to this article in the Financial Times (FT), central banks are intensifying their criticism of cryptocurrencies “as battle over the monetary system escalates”.

They argue that “digital tokens such as bitcoin have few redeeming features and work against the public good”.

The FT says: “the Bank for International Settlements (BIS), the global body for central banks, also dismissed stablecoins — a link between crypto and conventional assets — as an ‘appendage’ to traditional money. The strongly worded report was the clearest signal yet from central banks that they are ready to fight any effort to undermine their key role in the global financial system.”

The BIS says that “central banks stand at the centre of a rapid transformation of the financial sector and the payment system. Innovations such as cryptocurrencies, stablecoins and the walled garden ecosystems of big techs all tend to work against the public good element that underpins the payment system”.

However, as the FT points out, the BIS does endorse the development of cryptocurrencies backed by central banks themselves.

You can just imagine how this is going down with the crypto-crowd. Certainly, when it comes to Africrypt’s customers, they’d be sleeping a lot easier right now if the Reserve Bank had been there to stand behind them.

Talevi is the FM's Money & Investing editor.

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