With Localbitcoins trading volume up over 20% in recent weeks and over 1,000 merchants accepting bitcoin in South Africa, it’s clear that the nation’s lawmakers must provide a regulatory framework for businesses and speculators to operate within.
The South African Reserve Bank Has Not Released A Position Paper On Virtual Currencies since 2014
The recent increase in South African Localbitcoins trading volume can be interpreted as an indication of a real increase in bitcoin adoption, as supported by trading volume on the nation’s major exchange, Luno, also seeing a steady rise.
In 2017 many developed nations have begun to move towards introducing permissive regulation designed to encourage growth within Bitcoin’s associated industries. In recent months Japan has eliminated taxation on Bitcoin trading, declared Bitcoin to be exempt from consumption tax, and eliminated the possibility of double taxation on trading. Australia has moved towards ending its long-standing double taxation on bitcoin by proposing that transactions involving digital currencies no longer be subject to Goods and Services Taxation, and South Korea has also introduced permissive regulations regarding Bitcoin and other digital currencies.
Absence Of Clear Legal Scheduling Likely Has A Stifling Effect On Investment And Innovation
Despite progressive moves on the part of South Africa’s developed counterparts, the South African Reserve Bank has not released a Position Paper on Virtual Currencies since 2014 when Bitcoin’s market capitalization was less than a quarter of its current $46bn USD total, which many citizens feel emphasizes the need for regulators to catch up with the industry.
South Africa recognizes the basic rights of citizens to own, purchase, mine, and conduct private transactions with bitcoin, yet no tax regime currently exists for bitcoin mining or trading. Bitcoin is not currently classified under any asset or currency status, leaving businesses operating with virtual currencies unsure as to whether or not they are likely to incur retroactive capital gains taxation in the future.
Despite the ambiguity surrounding taxation, some have argued that South African regulators are highly permissive toward blockchain technology – arguing that the absence of a ratified legal framework does not hinder bitcoin-related enterprises from conducting their business.
Although the South African Revenue Service have stated that both speculation or transactions conducted in Bitcoin are subject to general South African tax law, the absence of clear legal scheduling pertaining to digital currencies likely has a stifling effect on investment and innovation within the South African bitcoin economy.
What regulatory approach do you think South Africa should adopt regarding Bitcoin? Let us know in the comments below!
Images courtesy of Shutterstock, Localbitcoins & Wikipedia
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