Stricter taxes on digital currency investments are on the horizon for South Africa. Cryptocurrency traders and owners should be aware of these, warns Mazars South Africa audit division partner Wiehann Olivier.
This follows from South Africa’s Minister of Finance, Tito Mboweni, publishing amendments to the Financial Intelligence Centre Act (FICA) in June 2020. The proposed amendments will include new rules around crypto-asset service providers (CASPs). They will oblige them to maintain further information, and to new protocols to observe when conducting due diligence on customers.
Proposed Cryptocurrency Reforms
A senior associate at the law firm Webber Wentzel, according to Business Tech, confirmed that CASPs fall under FICA (among others). The new move offers the following:
- Allowing for the exchange of cryptocurrency from one to another.
- Conducting transactions moving crypto assets from one account to another.
- Administration and safekeeping of a crypto asset.
Mboweni has been lauded as a reformer of South Africa’s financial protocols and institutions. He hopes to bring about much needed change in a country straddled by debts, political infighting, and massive government corruption. He has consistently been introducing new measures in that regard.
Mboweni has embarked on immense structural reform projects since South Africa’s economy downgraded to “junk” status in early 2020. These economic problems have since been exacerbated by the major financial losses induced by the novel coronavirus (COVID-19) pandemic.
It is not the first time that Mboweni has heralded in more stringent measures to regulate cryptocurrency. In January 2019, Business Day reported that the South African government, with Mboweni as Minister of Finance, was already in discussions to implement strategic responses to cryptocurrency to manage and regulate the digital assets cohesively and inter-governmentally. Mboweni wants to include more pervasively in the crypto asset question, the South African Reserve Bank, the South African Revenue Service (the national tax collecting agency), and the National Treasury, amongst other players.
It is yet to be seen how stringent the new taxes on crypto currency will be, with Mboweni having to weigh the sensibilities of both the more left-leaning members of his own party, the ANC, as well as an important parliamentary opposition party, the EFF, who are keen to implement heavy taxes on the wealthy and nationalise the Reserve Bank.