The South African Reserve Bank has issued guidance regarding its position on the purchasing and transfer of cryptocurrencies.
While the SARB does not regulate the trade of cryptocurrencies in South Africa, it has stated the consequences of purchasing and selling cryptocurrencies using international exchanges.
The only permissible way for South Africans to purchase cryptocurrencies from abroad is to use their single discretionary allowance of R1 million or individual foreign investment allowance of R10 million per year.
Additionally, the SARB will not allow a South African company to use the foreign direct investment dispensation to invest in cryptocurrencies from international exchanges.
As cryptocurrency transactions are not reportable on SARB’s system, this causes issues regarding the repatriation of value when converting it to fiat currency – or moving sales proceeds abroad.
Werksmans Attorneys director Leon Rood has now stated this could affect South Africans who purchase cryptocurrencies from international exchanges or who store their cryptocurrencies abroad.
Rood said South Africans would be able to purchase cryptocurrencies from local exchanges without encountering exchange control, however.
If local buyers opt to purchase from offshore exchanges at a lower dollar rate, they will have to use their single discretionary or foreign investment allowance to acquire the cryptocurrency.
This functions similarly to investing in shares on a foreign stock exchange.
If a South African purchases R20 million worth of cryptocurrency (above the threshold for international investment) via a local exchange and then moves that cryptocurrency to a wallet held in an offshore exchange, this could also be viewed as a transgression.
The SARB views this as a transgression of exchange control as the buyer is essentially exporting capital above the approved dispensation thresholds.
Acquiring cryptocurrency from offshore exchanges and transferring it to a local wallet to make use of price arbitrage could also incur the wrath of regulators.
Rood said further clarity and specific regulation is required for South Africans to be compliant with the exchange control regulations.
“In the interim, an investor should not overlook the exchange control regulations when wading into this already risky crypto environment,” he said.