By South Africa is a large financial hub on the African continent and therefore has the ability to lead the way forward in terms of blockchain development and cryptocurrency adoption.
The South African Revenue Services Cashing In
The South African Revenue Services (SARS), made it mandatory that registered taxpayers are liable to pay tax on their cryptocurrency gains.
In the South African Income Tax Act, the word “currency” remains undefined. This is significant as it means that cryptocurrencies themselves are not taxable.
“Cryptocurrencies are neither official South African tender nor widely used and accepted in South Africa as a medium of payment or exchange. As such, cryptocurrencies are not regarded by SARS as a currency for income tax purposes or Capital Gains Tax (CGT). Instead, cryptocurrencies are regarded by SARS as assets of an intangible nature.”
Income received or accrued from the trading of cryptocurrency falls under income tax. The value of a specified amount of cryptocurrency can be valued in South African Rands.
No Laws in South Africa, but it’s Legal
There are no South African laws which govern the virtual currency sector. The South African Reserve Bank (SARB) is observing the situation and has stipulated their guidelines in a 2014 white paper.
In South Africa, the Reserve Bank has the sole right to issue and manage money, in the form of banknotes and coins. As such, cryptocurrencies fall outside the jurisdiction of the Reserve Bank.
The Fintech Task Group
A Fintech task group has been appointed to manage all cryptocurrency and fintech developments in the country.
Francois Groepe, Deputy Governor of SARB, reported that the bank wants to make sure that cryptocurrencies, and their trade, are still adhering to South African laws:
“We want to ensure or establish whether there is still compliance with the relevant financial surveillance or exchange-control regulations.”
Bridget King, SARB director of banking practice, announced that
“Regulating cryptocurrencies prematurely could have the negative consequence of throttling the growth and innovation of the industry. If laws are drafted based on existing technology, which is still in its growth phase, there is a risk that the technology may have moved so much by the time the legislation is enacted, that the legislation is obsolete or requires updating almost immediately to align with the latest technology.”
Project Khokha
Project Khokha is a SARB initiative to check a proof of concept for a blockchain-based payment system in South Africa.
The system makes use of JP Morgan’s Quorum platform which provides participating parties with the experience of using blockchain technology in a safe, test environment.
It is possible to process transactions within two seconds, by a network of nodes in different locations, using distributed consensus. SARB was also able to view the details of transactions, which enables their regulatory oversight.
There have been no blockchain-based payment systems launched in South African to date. However, the use of distributed ledger technology and how it could improve the current South African payment system is now clearer:
“One objective of Project Khokha is to provide a better understanding of how South African Multiple Option Settlement (SAMOS) system would integrate with a DLT system. The intention is not to consider changing the approach with the SAMOS replacement, but to provide input to that project.”
How much regulation should the SARB impose? Let us know in the comments section below!
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