The Technology-neutral Approach and Electronic Money Regulation in the EU: Identifying the Promises and Challenges for Future Regulation in South Africa

Abstract

The rapid development of technology through the introduction of computer networks in the 1960s has brought with it numerous benefits for business communities. These benefits range from the speed and cost-effectiveness of online communication, to the speed of transacting and effecting payments using electronic devices. While this technological development has given rise to beneficial penetration of electronic payment systems into the world of commerce, these benefits are not shared by the regulating communities. Technological developments raise various regulatory questions for lawmakers. One such question is whether or not it is possible to regulate these fast-developing systems. The same question is also raised in relation to the regulation of electronic payment systems, including electronic money. In acknowledging the challenges of regulating the technological development of electronic money devices, the European Union has adopted a technologyneutral approach to overcome the challenges of strict regulation of this evolving technology, while attempting to provide them with the much needed legal status and certainty. In South Africa, there are on-going discussions as to whether or not (and how) to regulate electronic money devices. A cautious position has been adopted in order to avoid hindering these rapidly developing innovations through a restrictive regulatory framework. This paper highlights some promises and challenges by drawing on some lessons from a similar approach adopted by the European Union in its Second Electronic Money Institution Directives. The paper suggests some middle ground that may be applied to overcome the challenges posed by the adoption of a technology-neutral approach. The aim of the paper is to establish a clear path for the regulation of electronic money institutions in South Africa, by evaluating the effectiveness of a technology-neutral approach, as adopted by the EU.