The South African Reserve Bank (SARB) recently concluded a period of public comments on new proposals to regulate cryptocurrency assets.
In the paper, it proposed several changes to the way in which cryptocurrency-based services are allowed to operate in South Africa.
Among the proposed regulations is that platforms which handle digital assets will have to “FICA” clients. In other words, comply with provisions in the Financial Intelligence Centre Act.
This requires financial institutions to verify the identity of clients to combat money laundering and the financing of terrorism.
Services such as cryptocurrency trading platforms and wallet providers would also need to register with the relevant regulators. The details of the planned registration process are to be revealed before the end of March.
With the Reserve Bank aiming to make cryptocurrency services that operate in South Africa go through a registration process and become FICA-compliant, what does that mean for South Africans who trade on overseas exchanges?
Based on SARB’s proposal document, it doesn’t seem that much would change.
However, a senior associate in the tax team at Norton Rose Fulbright, Candice Gibson, explained that cryptocurrency traders will have to keep South African exchange control laws in mind.
Exchange control – R1-million allowance
“South African resident individuals are granted a R1-million single discretionary allowance per year, if they are over the age of 18 years and are in possession of valid South African identity document or smart identity document card,” Gibson said.
“The allowance may be used for any legitimate purpose which includes investing abroad, and is offered to the individual at the Financial Surveillance Department’s discretion and without any documentary evidence being provided to an authorised dealer of a bank.”
This means that if you want to use your allowance to invest in crypto assets abroad, you can.
“In the event that an individual wishes to invest in excess of R1 million abroad, an application would be required to be made via an ‘Authorised Dealer’ to the SARB for approval to remit funds out of South Africa,” said Gibson.
“Before being able to make such an application, the individual would be required to obtain a tax clearance certificate from SARS which is required to accompany the application.”