Since it appears that cryptos are here to stay, countries around the world continue to try to classify them and to regulate the industry. South Africa is among the latest examples of this effort as their Central Bank makes the claim that cryptos are only cyber-tokens, which cannot be considered real money.
South Africa tries to classify cryptos
One issue regarding cryptocurrencies is their classification and use in the real world. Efforts so far have had little success in most countries. Some, like the Deputy Governor of Reserve Bank, Francois Groepe, even state that the very term “cryptocurrency” is not the right thing to call digital coins since they do not work as stable units of value. This statement comes at a difficult time and will only make matters more complicated for regulators.
In order to study cryptos and find out whether or not they can be properly classified, the South African Reserve Bank created a special FinTech unit. Their goals included the possible creation of a policy framework and a potential regulatory regime. The main goal of the unit was to say whether cryptos can comply with financial surveillance or regulations regarding the control of exchanges.
Since the formation of the unit, the bank was opposed to the purchase and sale of crypto assets via international crypto exchanges. They only supported the purchase of cryptos via discretionary allowance, consisting of around R1 million, or $14,757.60 per year. Alternatively, they allow individual foreign investment of $14,757.60, or R10 million on annual basis. One thing that the bank decided not to tolerate was the use of foreign investment that would come from international exchanges.
Tax on cryptos
Earlier this year, in April, SARS (South African Revenue Service) mentioned that the holders of cryptos would soon start paying taxes on them. At that time, cryptos were classified as assets of intangible nature, meaning they are not considered to be money. With this classification, it was decided that cryptos can be taxed since they have value.
The same goes for India, which is a little unusual, considering that the country declared that using cryptos is illegal within their territory. Some reports claim that everyone who deals in cryptos in this country might have to pay a tax rate of 18% on all reported activities. The measure is currently being analyzed by the country’s CBEC (Central Board of Indirect Taxes and Customs).
The approval of this tax might have India’s digital assets classified as “intangible commodities”, instead of securities of currencies. Another consequence of bringing taxes for cryptos in India would include the turnaround from some very strict rules announced by the country’s RBI.
South Africa is one of the most advanced countries on the African continent when it comes to dealing with cryptos. Others, like Nigeria, remain distrustful of cryptos and consider working with them to be quite a gamble.