Are Reserve Banks and Treasuries dodging the inclination of digital currencies? Crypto has gathered great momentum in the last few years and has now become a perilous, but very profitable, investment or trading alternative. South Africa has been delaying the regulation of cryptos and for a long time, their use has been totally unregulated.
The South African Reserve Bank published a statement in April this year saying that crypto isn't deemed to be 'legal tender'. South African citizens are just needed to disclose their gains and losses generated from crypto transactions. The South Africa Revenue Service will focus on the goal of the taxpayer while ascertaining if the income is capital or revenue in making.
The National Treasury issued a draft Taxation Laws Amendment Bill for public comment on Monday, July 16, this year. This is the Treasury's first effort to regulate the usage of digital currency in South Africa and suggests viable changes to the VAT Act and Income Tax Act (ITA). If the amendments in their present form are put into effect as a regulation, it will highly dissuade and prevent the use of crypto in the country for investment, buying and selling purposes.
Among the suggested changes is the addition of crypto in the definition of 'financial instrument' in the ITA. Other financial instruments are debts, shares and loans.
Treasury further approved that the "acquisition, buying, issue, selling, collection or transfer of ownership of any crypto" be put to the definition of 'financial services' directly in section 2 of the VAT Act.
Since crypto isn't deemed legal tender, VAT vendors offering totally tax-deductible supplies that recognize and accept crypto as a method of payment won't be in a position to on-sell the crypto and also claim total input VAT as their commercial enterprises will be regarded as one that supplies a variety of supplies. Hence, only a section of the input VAT is deducted.
South Africa has much potential as a rising market to attract investments to the fintech industry. Cryptos make an integral part of the market and the Treasury's suggested changes, sans amendment and clarification, seem to control investment but not encouraging it. The usage of cryptos is highly increasing and it's more than likely that the Treasury and Reserve Bank will be pushed to address the insurrection very soon.
However, digital currency continues to garner massive interest in S.A, particularly considering the recent report of government corruption and land expropriation, according to a Coinidol report in August 2018. S.A nationals are much worried about the future of the S.A’s economy and are now looking for other alternative means to safely keep wealth.