Reserve Bank to end ‘crypto Wild West’ in SAbit2main
Crypto investors must remember that they still have to report such transactions and must make sure they comply with all the tax requirements. Photo: Chesnot/Getty Images
The SA Reserve Bank will not interfere with future regulations regarding cryptocurrencies, because people are free to choose which assets they want to invest in. But people need to be warned that they may lose their money because investing in cryptocurrencies is not the same as making a bank deposit.
Kuben Naidoo, a deputy governor of the Reserve Bank, this week said that new regulations on cryptocurrencies could be implemented in South Africa within the next 12 to 18 months to ensure the security of cryptocurrency platforms, to identify criminal activity such as money laundering and to help to protect investors.
Thomas Lobban, an expert in crypto taxation at Tax Consulting SA, says South Africans should be relieved that the central bank is not prohibiting cross-border crypto trading and investment.
But crypto investors must remember that they still have to report such transactions and must make sure they comply with all the tax requirements, he said.
As part of PSG’s Think Big talk series, Naidoo emphasised that the Reserve Bank did not want to interfere with investors’ crypto decisions.
The market movements fall outside the regulatory framework in a free market [economy] and investors are free to choose in which assets they want to invest. It is not our job to choose winners and losers, but to regulate, to protect crypto investors adequately and to warn about the risk of losing money because of the volatility in the crypto market.
Mirror Trading International (MTI), in which thousands of people worldwide lost billions of rands invested in cryptocurrencies before MTI collapsed, is one of the recent scams that badly hurt consumers.
The US Commodity Futures Trading Commission recently sued MTI for $1.7 billion (R29 billion) in fraud over the “misuse” of the bitcoin that investors bought, reports coindesk.com.
READ: Who are South Africa’s cryptocurrency investors?
Naidoo said the first step was to turn crypto assets into a financial product for better tracing of possible money laundering, tax evasion and the financing of terrorist activities.
According to Naidoo, many role players have indicated that stricter crypto regulation would help legalise the use of technology. The regulation is intended to separate the “good from the bad”.
He said the use of crypto for money laundering and other illegal activities raises concerns.
“About 90% of transactions in the US, where payments are made with crypto, are for drugs or gambling where people want anonymity.
“Unfortunately, cybercriminals also use crypto to demand ransom money, and to fund cross-border kidnappings and international crimes.”
Lobban and Ruan Stander, a crypto asset tax specialist, say, if the regulations are implemented, anyone offering advice or intermediary services on crypto assets would have to be a recognised financial services provider under the Financial and Intermediary Services Act.
“This includes South African platforms for crypto assets, brokers and advisers.”
According to Lobban, this will officially be the end of the “crypto Wild West” in South Africa.
According to Luno, the international crypto company established by two South Africans, about 300 million people worldwide used cryptocurrency in the first quarter of this year.
READ: Podcast | Inside a cryptocurrency scam
Luno now has 10 million customers in more than 40 countries. The latest 1 million customers entered the field within six months and more than 40% of them are in South Africa, said Marcus Swanepoel, CEO and co-founder.
Luno wants to place cryptocurrency in the hands of more than 1 billion people by 2030.
Marius Reitz, general manager of Luno in Africa, says South Africa and Nigeria are among their most important markets and this shows how popular crypto is in emerging markets.
South Africans deposit an average of R480 when they open a Luno account, but can buy for as little as R1. A total of 82% of new customers who buy crypto choose bitcoin and 28% choose ethereum.
Merchants, a company that specialises in service delivery and consumer satisfaction, says a survey in the first quarter of this year showed 53% of respondents had little or no knowledge of cryptocurrencies, only 14% felt they knew enough about the topic and the rest were mostly neutral, yet the level of interest was high.
Matt Conn, head of revenue at Merchants, says more than half of the respondents indicated they would probably trust and invest in cryptocurrencies more if their existing bank offered them. Banks have an opportunity to get involved in the crypto environment soon, he says.