Cryptocurrencies are becoming increasingly widespread worldwide, especially in South Africa. Bitcoinโarguably the most well-known cryptocurrencyโhas been the go-to option for many prospective holders and investors.
Cryptocurrency is a digital asset. It is the newest and most promising asset to present in South Africa. The fundamental goal of Bitcoin, a relatively new and entirely digital currency, is to give every person access to a more equitable financial system where everyone is treated equally. You may purchase and sell Bitcoin with a reliable South African crypto exchange. It is basic enough that transactions occur through a computer or smartphone utilizing the mobile app.
Because Bitcoin and other cryptocurrencies do not have a legal status or regulatory structure in South Africa, they remain unregulated. In South Africa, trading cryptocurrencies is legal but at your own risk.
In this article, weโll talk briefly about Bitcoin, including its fundamentals and some standout characteristics that have made it a valuable asset.
What is Bitcoin (BTC)?
The most notable aspect of Bitcoin (BTC) is its reputation as the original cryptocurrency. There will only ever be 21 million Bitcoins in total. But each Bitcoin comprises 100,000,000 smaller pieces called sats, or Satoshis. Peer-to-peer transactions for each of these are also possible via the Bitcoin network.
In essence, Bitcoin is both a global payment system and a type of digital currency. However, the Bitcoin payment network runs without interference from any bank, authority, or other outside party.
Because of its completely decentralized network, governments and banks cannot impede Bitcoin payments.
Furthermore, Bitcoinโs peer-to-peer payment network enables the settlement of international transactions in seconds while avoiding the customary exorbitant money transfer fees.
Then, as there will only ever be 21 million Bitcoins, they become more and more rare every day. As a result, the value of Bitcoin gradually rises.
Is Bitcoin legal in South Africa?
In South Africa, bitcoin is not illegal. This implies that, like citizens of most other nations, South Africans are free to purchase or sell Bitcoin. Having said that, Bitcoin does not profit from being recognized by the government as money.
Since cryptocurrencies do not enjoy formal status, there is essentially no government regulation. Nonetheless, South Africans must still pay South Africa crypto taxes on their Bitcoin investment gains. We still have a long way to go regarding Bitcoin legislation, but we are moving forward gradually.
Since buying and trading Bitcoins in South Africa is entirely legal, you are free to buy and sell Bitcoin without limitations. The Reserve Bank of South Africa asserts that it has no oversight or control over the Bitcoin market.
Additionally, while rules are being drafted, there are currently no particular cryptocurrency regulations. Nonetheless, certain elements are essential to consider.
First, even though cryptocurrencies are unregulated, South African crypto exchanges and intermediaries must follow Know Your Customer (KYC) and Anti-Money Laundering (AML) laws. This implies rigorous identification verification procedures are required for South African exchanges like Luno.
You should also remember that the South African Reserve Bank has stringent guidelines governing foreign exchange transfers. For example, Exchange Control Regulation 10(1)(c) prohibits buying Bitcoin on a South African crypto exchange and transferring it to an offshore exchange. However, this regulation does not seem to affect the purchase of crypto assets on an offshore exchange.
Why is Bitcoin so Popular in South Africa?
Bitcoin aids South Africans in overcoming numerous financial issues they deal with daily. A couple of these issues are listed below:
Devaluation of Currencies
The devaluation of currencies is a significant issue that many nations, including South Africa, experience. In the last several years, the South African randโs value against the US dollar has dropped by more than 60%! Put simply, this indicates that there are fewer goods and services that our currency may be used to buy.
Hyperinflation and Inflation
There is a limited supply of 21 million Bitcoin coins. This indicates that Bitcoin is immune to inflation or hyperinflation due to its unique characteristics.
The yearly inflation rate of the South African Rand is over 5%, whereas the inflation rate of Bitcoin is 1.82%, which might decline over time.
Bank the Unbanked
More than 11 million people in South Africa lack access to a bank account. We could enable all these folks to engage in the economy by utilizing Bitcoin. Anyone may use Bitcoin for free; you only need an internet connection and a basic device. Moreover, Bitcoin enables quick, inexpensive transfers to anybody, anywhere in the world. Thanks to this, many Africans could send money home to relatives who reside in a distant region or nation.
Investing or Speculating
Even if Bitcoin solves these issues, individuals purchase it as a speculative investment. Many people think that the price of Bitcoin will keep rising as time goes on.
It is reasonable to say that interest in Bitcoin has grown significantly in South Africa, and it doesnโt appear that this trend will slow down anytime soon.
Regulatory and Legal Landscape of Bitcoin in South Africa
Government and financial watchdogs passed new legislation governing the sector in 2018. The South African Reserve Bank (SARB) oversees the countryโs financial system, which includes cryptocurrencies. Because SARB oversees currency management, the South African Reserve Bank Act of 1989 states that only SARB banks can issue coins and notes.
However, Bitcoin does not meet the criteria for being considered legal tender. Therefore, payments made using Bitcoin in South Africa might not release a debtor from financial obligations, and buyers might have to assume that South African law wonโt accept their Bitcoin payments. Furthermore, businesses have the legal right to reject Bitcoin as an acceptable form of payment.
The FSCA published a new proclamation in 2020 that mostly kept the main recommendations mentioned in the previous draft and finalized its policy position on digital assets. It also added new laws to address specific issues, such as risk management and consumer protection.
One clever feature of Bitcoin is that it allows users to use the software anonymously, which opens the door to money laundering. It also presents additional risks because cryptocurrency cannot be trusted due to its lack of management. Due to Bitcoinโs decentralized nature, which prevents it from being governed by a state or bank, it presents several challenges regarding taxes, exchange control laws, bank fee losses, and the devaluation of national currencies.
Despite this, Bitcoin has a lot of benefits. For example, it is a widely accepted way to send money in a much โsimpler, faster, and more efficient manner.โ
This is clear from the fact that Bitcoin runs on a โpeer-to-peerโ network, implying that money is transmitted directly to the bearer without needing a bank to function as an intermediary.
South Africa Cryptocurrency Laws
In South Africa, while there isnโt a single law governing crypto-assets, various statutes impose legal obligations on holders. These include the Income Tax Act of 1962 and the Exchange Control Regulations of 1961, which refer to the Currency and Exchanges Act of 1933. On April 6, 2018, the South African Revenue Services (SARS) clarified that standard income tax rules apply to cryptocurrencies, and taxpayers must declare their cryptocurrency income, with non-compliance potentially leading to interest and penalties.
South African lawmakers have recently shown interest in expanding laws to cover crypto assets more comprehensively. For instance, on November 20, 2020, the Financial Sector Conduct Authority (FSCA) issued a draft declaration suggesting that crypto assets be categorized as โfinancial productsโ under the Financial Advisory and Intermediary Services Act (FAIS Act), similar to shares and derivatives. This move aims to regulate financial advisory and intermediary services related to crypto assets, requiring providers to be licensed as financial services providers and adhere to FAIS requirements. This included the General Code of Conduct for Authorized Financial Services Providers and the Determination of Fit and Proper Requirements.
Despite these efforts, cryptocurrencies in South Africa remain insufficiently regulated to protect market participants from fraudulent activities fully.
In 2016, representatives from the National Treasury, SARB, FSCA, and the Financial Intelligence Centre formed the Intergovernmental Fintech Working Group (IFWG) to understand fintech developments and their regulatory implications. Similarly, in 2018, the IFWG and SARS created the Crypto Assets Regulatory Working Group to specifically address South Africaโs stance on crypto assets.
The Future of Cryptocurrency in South Africa
Although the use of digital currencies in South Africa has been rising steadily in recent years, several factors might potentially impact the cryptocurrency market there. These factors include changes in regulations, the state of the economy, and public opinion. The creation of new digital assets, such as nonfungible tokens, and innovation are driving the continued establishment of a regulatory framework.
Another significant element that could impact the growth and acceptance of cryptocurrencies is the state of the South African economy. Due to the nationโs recent difficulties, such as high unemployment and inflation, many South Africans are now looking into alternate financial and investment options. Cryptocurrenciesโ decentralized and international character makes them a viable answer to some of these problems.
In South Africa, public opinion will also have an impact on the direction that cryptocurrencies take. Like everywhere else, some South Africans are excited about digital currenciesโ potential innovations and advantages. Because of the recent volatility and unpredictability of the cryptocurrency market, some people continue to be wary or skeptical.
Despite these obstacles, there are many reasons to be optimistic about the future of cryptocurrencies in South Africa. The nationโs populace is youthful, tech-savvy, and increasingly interested in blockchain technology and its possible uses. Furthermore, some forward-thinking fintech and cryptocurrency businesses are active in South Africa, contributing to the industryโs uptake and innovation.
Is Crypto Taxable in South Africa
You must pay the South Africa crypto tax. Cryptocurrency gains from purchases and sales are taxable since the SARS views cryptocurrencies as intangible assets for taxation purposes.
Those purchasing and trading cryptocurrencies must report any gains or losses as part of their taxable income and pay taxes on any earnings. The individualโs income tax bracket determines the South Africa crypto tax rate; currently, the highest rate is 45%.
Taxable income
Tax rates range from 18% on taxable income under one South African rand (ZAR) to 216,200 ZAR ($11,112), with various rate bands applied to reach 45% on taxable income over 1,656,601 ZAR ($85,151).
How to Buy Bitcoin in South Africa
Bitcoin is the most popular cryptocurrency in South Africa, and several methods are available to purchase it.
Cryptocurrency Exchanges
The most common method is through South African crypto exchanges such as Luno or local platforms like Valr, Altcoin Trader, and iCE3X. To buy Bitcoin on these exchanges, users must create an account, complete identity verification and compliance checks, deposit ZAR into their account, and then order to buy Bitcoin at the current market rate.
Peer-to-Peer (P2P) Marketplaces
Another option is using peer-to-peer marketplaces like Paxful or Hodl Hodl. These platforms enable users to buy Bitcoin directly from individuals selling it. You can pay in ZAR or another mutually agreed-upon method.
Bitcoin ATMs
A growing number of Bitcoin ATMs in South Africa allow users to purchase Bitcoin with cash. Websites such as CoinATMRadar can help locate these ATMs.
Bitcoin Brokers
Users can also buy Bitcoin through brokers such as Coindirect or Ovex. Brokers act as intermediaries between the buyer and the South African crypto exchange, facilitating the purchase at the current market price.
While buying Bitcoin can be risky, individuals must conduct thorough research and exercise caution before investing. You must ensure the safety of your Bitcoin by using a secure wallet and follow the best practices for cryptocurrency security.
