Nowadays, Bitcoin or cryptocurrency is no longer fresh new news to many people around the globe however, it is still has a difficult concept to understand, especially for newbies. As a basic understanding, digital currencies exists solely online and therefore it is intangible. Also, it is a decentralized currency that means, the value of the virtual currencies rely solely on the user’s networks or through ledger technology such as Blockchain which serves as a Public Financial Transaction Database. Consequently, the legality and regulation for digital currencies will depend on the Country’s jurisdiction. In this case, we’ll discuss everything we need to know about South African crypto legality and regulation.
Based on the recent report, South African Reserve Bank (SARB) is starting to regulate digital currencies with the help of Blockchain solutions provider. Currently, the central bank of the Republic of South Africa selected Bankymoon to conduct regulatory sandbox.
Lorien Gamaroff is a chief executive officer of the selected Blockchain solution provider who confirmed the deal at a “Norton Rose Fulbright Blockchain and Bitcoin event,” and his now responsible of the development of the project. Lorien continued by stating that his Company has been chosen as the premier service to try out virtual currency regulations in South Africa.
Among the innovated economies around the globe and embrace the development of crypto regulations and legalities, South Africa has been found covering in the entire process. Presently, South Africa is in progress of developing a system that regulates the operation of cryptocurrencies and Bitcoins. In concern about the “framework” of the process, Lorien has implemented the “Regulatory Sandbox” to SARB in order to get started according to the announcement from the South African Government.
To assess this matter, we’ll try to explain three key issues regarding the acquirement and use of Bitcoin and other virtual currency in South Africa.
- Is the use of virtual currency legal in South Africa?
- Taxation Laws in South Africa
- An option within the cryptocurrency justice system
Does South Africa consider Bitcoin or other cryptocurrencies as a legal currency?
The simple response to this question is YES and it’s even legal. The complicated part of this matter is the position of the authorities concerning this entire economic innovations.
Presently, virtual currencies in South Africa is in progress of trying out to regulate Bitcoins, though it’s still unregulated. However, the South African Reserve Bank (SARB) issued a Whitepaper in YR2014 defining its position on Virtual Currencies (VCs) and Decentralized Virtual Currencies (DCVCs).
Link: South African Reserve Bank – Position Paper on Cryptocurrencies
Here are some essential points about cryptocurrencies in general from the issued Whitepaper.
- All Virtual Currencies are NOT Legal Tender – This means that a LEGAL TENDER is the notes and coins that are officially issued by the national bank which you can also read the details on section 3.2.3 of the issued whitepaper.
- Since digital currencies are intangible, it means that it falls outside the jurisdictions of the above definition.
- The Republic of South African Reserve Bank governs and has the sole right of issuing and managing all currency in the form of coins and notes – These are Legal Tender, unlike the virtual currencies.
- Consequently, the user of Bitcoin and other cryptocurrencies to make payments is NOT acknowledged by Law. Also, a merchant is allowed to refuse any kind of digital currency as a payment.
- South African Reserve Bank does not have any objection of using DCVC’s (virtual currency) – On section 2.1 of the whitepaper, it indicates the authorization of using DCVCs for trading and exchanges of Bitcoins and other cryptocurrencies in South Africa.
- Bitcoin or ETH and other cryptocurrencies could be converted to Legal Tender, this will be done like the way on how tokens or gift vouchers use, but NOT as a legal form of payment.
Taxation Laws for Cryptocurrencies in South Africa
From a recent report, In South Africa, Bitcoin or ETH and other virtual currencies are NOT taxable, though there already a speculation that all transaction in Bitcoins and all type of digital currency are done to the overall rules of South Africa Tax Regulations.
The South African Revenue Service (SARS) just released a “Draft Cryptocurrency Tax Law” last April on this year 2018. The draft outlines the frameworks of digital currency taxation in the Country.
Digital currencies is neither an official South African Tender nor accepted as a medium of payment or exchange, and it’s currently not widely used in the Country. The cryptocurrencies are not considered by SARS as a currency for ‘Income Tax’ or ‘Capital Gain Tax (CGT).’ Instead, it’s classified as intangible assets which subject to income tax. If the draft regulation is approved, then, South Africans will be required by Law to apply the Cryptocurrency Tax Legislation from overall crypto transactions.
Also, the draft legislation specifies that all virtual currency transactions are exempted from Value-Added Tax (VAT). This is the fact that all transactions done using cryptocurrencies are separate from Financial Service Transactions. Therefore, purchasing, selling, trading, exchange, holding, transfer, ownership, and issuing of digital currencies will not be covered by the VAT under the proposed Cryptocurrency Taxation Law.
Can you get Legal recourse within the virtual currency justice system?
The South Africa Reserve Bank has previously notified the public against Bitcoins and other virtual currencies by proclaiming that all digital currencies have neither a legal status nor a regulatory framework. There are several potential risks for those cryptocurrency enthuse when involving any transactions take place across the Bitcoin market, this includes a lack of security measures and the challenges of cryptocurrency convertibility.
SARB stated that it doesn’t regulate digital currencies. Therefore, any kind of risk by using virtual currencies will not be acknowledged. You may not have the legal recourse. Actually, the authorities have avoided themselves, indicating that it will depend on the individual’s decision whether or not they wish to use cryptocurrencies. For that reason, when things go wrong – expect for NO help from the authorities.
However, this may still be possible to get legal recourse. The justice system may be persuaded to do something regarding on this concern especially at cases involving cryptocurrency theft and other digital assets. Or consider for example that someone hacked and steals your digital assets over your account before you cash it out – the courts would handle that for you.
The fact that digital currencies are not yet widely used around the globe and the concept is not that easy to introduce to everyone, especially the development are still progressing which most of the Countries remain uncertain to make decisions in concern to Regulations and Law. Also, several Financial Institution Government frightens of committing to making these decisions due to the security measures of the entire cryptocurrency space. To be precise, one of the determining factors on this economies is the suspected criminal nature associated with, and anonymous transactions took place across virtual currency networks.
About the Author:
Adrian Estremos is an Information Technology (IT) professional who specialized on PBX Phone System Development, Network Infrastructure, Software Developer, and a Crypto enthuse. He is now involved in the Blockchain Technology space and actively provides updated essential guides and feature pieces on all things related to Bitcoin | Cryptocurrencies | Blockchain Solutions Provider | ICO Platform and services | Crypto Platform Services and many more. More information on Adrian Estremos’s blogs, reviews, guest posting, etc. can be found at cryptoversal.com