The post Crypto regulation in South Africa 2024 – A Proactive Government on Blockchain appeared first on Coinpedia Fintech News
South Africa is the second largest economy in Africa, known for its big farming and tourism industries. But it also has a lot of poverty and ranks high for income inequality.
South Africa is seen as one of Africa’s most advanced countries in terms of its economy. However, it didn’t have clear rules about cryptocurrencies until 2018, when the South African Revenue Service said they would be taxed. Now, the South African Reserve Bank is working with Bankymoon, a company that provides blockchain solutions, to test new rules for cryptocurrencies.
South Africa’s cryptocurrency community is growing, with many startups and entrepreneurs involved. Banks are also looking into using blockchain technology to make their services better for customers.
Is the South African Government in Favour of Cryptos?
Cryptocurrency is legal in South Africa, where there’s a supportive regulatory environment for it. People and businesses can legally use cryptocurrencies.
Several exchanges and trading platforms operate under the regulation of the Financial Sector Conduct Authority (FSCA). But it’s important to know that cryptocurrencies aren’t considered legal tender in South Africa, and their use as payment isn’t widespread yet.
South Africans can invest in crypto and trade through different platforms. The government has set up regulations to protect investors and foster innovation in the cryptocurrency sector. However, investors should be aware of risks like market changes, cybersecurity, and scams.
While the South African government hasn’t recognized cryptocurrencies as legal tender, they’re actively working to regulate them. Finance Minister Tito Mboweni announced the creation of a Cryptocurrency Assets Regulatory Task Force. This group, including members from various financial bodies, will research blockchain technology’s potential applications in the country.
Crypto Regulations in South Africa
Way back in 2014, South Africa Reserve Bank (SARB) confirmed its stand on virtual currencies that it does not recognize them as legal tenders and SARB has the sole authority to issue a legal tender. Also, warned Cryptocurrency users on Trade and using digital money
They further confirmed again the same in 2017 that virtual currency is not considered as ‘currency’ in South Africa.
The Financial Sector Conduct Authority (FSCA) is the regulatory body responsible for monitoring cryptocurrencies in South Africa collaboration with South Africa Reserve Bank (SARB).
The first step taken by the government in virtue to regulate cryptocurrencies was to change the status of cryptocurrencies from ‘digital tokens’ to ‘hobbyist financial instruments’.
The three main reason, the government is concerned regarding cryptocurrencies could be,
Unaware of the risks involved in cryptocurrency trading.
The regulatory framework needs to be developed from scratch.
As the cryptocurrency trading supports anonymous transactions, the possibility of money laundering or any illegal activities increases.
Later in January 2019, SARB came up with the limited regulation with the cryptocurrencies where-in crypto exchanges and wallet providers would have to register with the regulators under new rules.
However, the central bank maintained its stand on the cryptocurrencies that they should remain without legal tender status and should not be recognized as electronic money.
Recently, in April 2020, South Africa’s top regulators proposed 30 new rules to regulate cryptocurrencies. The government is all set to impose more strict regulations on the cryptocurrencies.
South Africa Proposes 30 Rules to Regulate #Cryptocurrency – https://t.co/cLrQEizUWO
— Citadel Advantage (@StanleyEpstein) April 23, 2020
In October 2022, the FSCA declared crypto assets as a financial product, subjecting them to regulations under the FAIS Act. Providers of cryptocurrency services need authorization and must apply for a license, with existing providers required to do so by the end of 2023. The need for digital assets regulation stemmed from the FATF report in 2021, which highlighted the absence of regulation in South Africa, especially concerning AML and CTF laws.
This is an historic moment for South Africa:Today the Financial Sector Conduct Authority (FSCA) declared a crypto asset as a financial product under the FAIS Act.This Declaration was published in the Government Gazette as well as the FSCA website.
— Farzam Ehsani (@farzamehsani) October 19, 2022
The process of understanding crypto assets began in 2014 with a joint initiative involving the National Treasury, SARB, FSCA, SARS, and FIC, which alerted the public to the risks associated with crypto assets.
South African officials emphasized the importance of crypto laws and a regulatory framework to protect investors and ensure sector stability. Given the industry’s volatility and cybersecurity risks, individuals and businesses investing in cryptocurrencies are advised to stay informed about regulatory updates and exercise caution. Advertisements for crypto assets are now regulated, with the South African Advertising Regulatory Board amending its Code of Advertising Practice in January 2023 to include specific requirements. These requirements mandate clear disclosure of the potential for capital loss in crypto investments and ensure that advertisements convey a clear message. Additionally, influencers or ambassadors in the cryptocurrency social media space must comply with regulations to prevent the dissemination of misleading information.
Laws Implemented on Cryptocurrencies
The crypto asset service providers that include exchanges and custodial service providers are obliged to register under the Financial Intelligence Centre Act of 2001 (FICA). The act requires the service providers to comply with anti-money laundering and counter financing of terrorism requirements.
What the #cryptocurrency community in South Africa could expect from soon to be released #SARB’s regulatory framework as highlighted by @SACrypto_https://t.co/4qB0U8DkgP
— CryptoLadyAfrica (@CryptoLadyAfric) March 19, 2020
Post the Crypto Laws released by SARB in Jan 2019 , The South African Central Bank recently announced it is set to introduce new laws to prevent cryptocurrency from being used to evade currency controls. The new laws placed limits on the amount of local currency sent outside the country,
Taxation and Mining
Taxes on Cryptos and its activities
South African Revenue Service (SARS), the country’s tax authority has not exempted the crypto traders and miners from paying taxes. The existing tax rules cover cryptocurrencies too where-in the taxpayers are required to declare cryptocurrency gains or losses as part of their taxable income.
The cryptocurrencies are subject to either Income Tax or Capital Gains tax. The given below are the different scenarios when the cryptocurrencies could be taxed.
Cryptocurrency obtained through successful completion of mining
Exchanging the fiat currency to cryptocurrency or vice versa.
Cryptocurrencies indulged in barter transactions that’s nothing but used as a mode of payment.
Income tax is applied on the cryptocurrencies when you earn the cryptocurrencies in exchange of a goods or services rendered or if you are a day trader.
On the other hand, Capital Gain Tax is applied when you bought and held the cryptocurrency for a very long period of time, say more than 3 years and exchange to fiat currency.
Mining
The economy of South Africa is strong compared to that of other African countries. Thus making them an easy task to buy mining equipment. The government’s positive approach to blockchain technology created a favourable environment for mining.
The cryptocurrencies earned after the successful mining of cryptocurrency is considered as taxable income and liable to pay taxes as per the existing Income tax of the country.
Series of Events
19-04-2020:- The South African Reserve Bank proposes 30 rules to regulate cryptocurrencies. These recommendations do comply with FATF standards.
#South #Africa’s #top #financial regulators, including the #South #African #Reserve #Bank, have jointly released a #policy paper with 30 recommendations for the regulation of #cryptocurrency,https://t.co/Ygc7IZXpSg#Rakamoto #SundayThoughts #Blockchain #Crypto #Bitcoin #Coin
— Bitcoin Dollar (@BitcoinDollarUS) April 19, 2020
09-04-2020:- Cardano partners with South African Blockchain Alliance (SANBA) to promote blockchain use in South Africa.
FNB shuts down South African cryptocurrency-linked bank accounts https://t.co/XFkEjZb2W3
— MyBroadband (@mybroadband) November 19, 2019
15-03-2020:- Binance announced fiat support of $1 million in Blockchain Education to South Africa.
#cryptocurrency #newsBinance to Launch Fiat Support in South Africa, Donate $1M to Blockchain EducationLink: https://t.co/Wya7C0wVv5How do you like this news? pic.twitter.com/4iZlcN7PGB
— Prtship.com (@prtship_com) March 15, 2020
19-11-2019:- One of the biggest banks in South Africa FNB shuts down the bank accounts of the cryptocurrency exchanges.
FNB shuts down South African cryptocurrency-linked bank accounts https://t.co/XFkEjZb2W3
— MyBroadband (@mybroadband) November 19, 2019
16-01-2019:- The South African Reserve Bank released a Consultation Paper to enforce new rules on the cryptocurrency, their assets and the ATM’s.
09-04-2018:- SARS stated that cryptocurrencies would be covered under the normal Income tax rule. However, the taxpayers are subjected to declare their crypto gains or losses in their taxable income. It released a circular on this.
13-02-2018:- SARB announced its new Fintech programme to track and analyse fintech developments.
26-07-2017:- The South African town of Orania to launch its own digital currency e-‘ora’ which will be printed Orania’s Chamber of Commerce and distributed through its central bank.
Orania launches its own digital currency#ora #oracurrency@MashSammy @AFP @CoinDigest https://t.co/Wpz8k5UTzP via @Coinpediamarket
— Coinpedia – Fintech News (@CoinpediaNews) July 26, 2017
23-08-2016:- In a Speech at the cybersecurity conference held in Johannesburg, the governor of the Central Bank, Lesetja Kganyago indicated that the government is exploring the possible use of the blockchain technology and interested in the implementation of the technology.
20-02-2014:- The South African Central Bank warned against the risks involved in cryptocurrencies and issued a Position Paper on Virtual Currencies.
Concluding Thought
South Africa offers significant opportunities for blockchain companies and cryptocurrencies, with the government eager to implement blockchain technology but enforcing stricter rules for cryptocurrencies.
Despite challenges, there’s optimism about the future of cryptocurrencies in South Africa. The country has a young, tech-savvy population with a growing interest in blockchain technology. Innovative fintech startups and crypto firms are active in South Africa, driving adoption and innovation in the industry.