Crypto in Africa: Gov’ts hold back on crypto regulation, South Africa drafts tax law
The blooming cryptocurrency industry in Africa continues to operate in legal gray areas as it progresses upwards. This leaves traders, developers, investors and enthusiasts, among others, to their own devices. While other countries worldwide give cryptos attention with intention of regulating them, their African counterparts remain reluctant to make any substantial moves.
According to a report by Eco-Bank, the lukewarm approach is occasioned by unwillingness to make the first move. They are, therefore, left in a sort of standoff as each waits on the other. According to the Togo-based region’s leading independent banking group, they do not wish to over-expose citizens to cryptocurrencies. This is in a bid to protect the ambitious people from eventualities such as a possible future crypto crash, which may have far-reaching consequences in the economy.
The survey conducted sampled 39 Sub-Saharan countries. Of them, 21 have not taken any public stance of digital assets whatsoever, while 15 are neither here nor there—staying away from commencing regulations but, at the same time, warning investors to be careful with them. South Africa and Swaziland however have taken the seemingly unpopular path and are adopting generally favorable stances. Namibia, on the other hand, makes a total about-face by placing an outright ban on digital assets even as they rapidly develop as a technology and an asset class in neighboring countries.
Crypto volatility contributes a big deal to this. It derails conversations on the core reasons of why we need cryptos, including the potential of their resultant technology. Understandably, cryptos are hugely seen as a quick way to make money, thus the speculative kind of investments. Additionally, cryptocurrencies had a rough start on the continent, as they were initially introduce by scammers who ran Ponzi schemes with them.
South Africa to see through taxation law
Nevertheless, the progress in South Africa paints an optimistic picture. After announcing that they would begin taxing income derived through cryptos, the South African Revenue Services (SARS) made good on its promise and are currently putting together a crypto tax law draft. The draft is set to outline virtual assets laws, creating a framework for crypto revenue systems.
Through it, the country will be able to levy taxes on incomes generated from crypto transactions. Although they are not recognized as legal tender, and that it is not much embraced as a means of exchange and payment, citizens will have to declare their proceeds from virtual assets transactions. The SARS remains on safe ground on this, as the Income Tax Act does not define the term currency. As such, digital assets fall under the umbrella of ‘possessions of immaterial nature’ and are subject to taxation according to the act.
However, they will not be subjected to Value Added Tax (VAT). This means that daily crypto usage related to selling, buying, issuing or possession will be excluded from fiscal services transaction regulations.
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