The South African Reserve Bank recently issued guidance regarding its position on the purchase and transfer of cryptocurrencies.
The SARB does not regulate the exchange of cryptocurrencies in South Africa, but moving cryptocurrency overseas and buying or selling on a foreign exchange could get you into trouble with exchange control regulations.
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.
Many South Africans have invested in cryptocurrencies through both local and international exchanges, and many have moved their cryptocurrency “overseas”.
MyBroadband spoke to Werksmans Director Leon Rood to determine how cryptocurrency owners should proceed in the face of the SARB’s stance on digital currencies.
Rood said South Africans who have transacted with cryptocurrency do not need to do anything to ensure compliance with the SARB regulation.
“My view is that for residents who have undertaken transactions, no action is strictly required as SARB have made it clear they do not regulate cryptos,” he said.
“An additional defence would be to state that the transactions will mostly fall under the R1-million annual single discretionary allowance anyway.”
However, Rood advised that going forward, residents who wish to take out large sums should formally declare the use of the R10-million allowance, or be sure that they are within the R1-million limit.
Transactions below the annual single discretionary R1-million allowance do not require approval, so most South Africans can argue they have abided by the regulations.
“Moving inter-wallet has no guidance, but I would advise the most risk-free approach would also be to argue it’s under the R1 million,” said Rood.
“Larger amounts may become too tricky to defend.”
The SARB currently has no formal mechanisms to monitor and report transactions conducted using cryptocurrency, but it can investigate arbitrage conducted between local and international exchanges.
“The scheme of using the arbitrage is definitely being investigated, there are at least three matters under review currently,” said Rood.
“This is easier to pick up as actual rand is applied or involved, so detection is easier.”
Rood said that no defined regulation currently applies specifically to cryptocurrency transactions.
“For the moment, as there is no actual regulation or guidance, one may argue South Africans cannot be said to have contravened anything and for the moment no remedial steps are required.
The SARB has also not stated how it will address the distributed nature of the blockchain and how inter-wallet transfers will interact with exchange control.
“SARB intends launching a proof of concept for blockchain-based interbank clearing and settlement in partnership with New York-based ConsenSys,” said Rood.
“This project is aimed at understanding the consequences of using distributed ledger technology to transfer value and a public report on the findings is expected to be released during the second quarter of 2018.”