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Regulatory Working Group Dedicated to Cryptocurrencies Create by South Africa

Tito Mboweni, the Minister of Finance of South Africa, explained that the region’s government has created a regulatory working group dedicated to cryptocurrencies. The working group includes representatives from multiple South African agencies and aims to produce a comprehensive regulatory response to the growing digital asset economy.

Aims to Provide a Cohesive Regulatory Response to Cryptocurrencies

Last November, research commissioned by the firm Luno indicated that 70% of South African consumers define digital currencies as an investment, with respondents also claiming to hold cryptocurrencies over the long term. The P2P exchange Paxful has seen a 25% increase in 2018 and Localbitcoins volumes have swelled as well. The South African government has noticed the rising trend and members of the SA Revenue Service (Sars), South African Reserve Bank, Treasury, Financial Sector Conduct Authority, and Financial Intelligence Centre have formed a cryptocurrency working group to better grasp the situation. The cryptocurrency economy has grown significantly in South Africa according to multiple studies conducted last year.

South Africa’s Finance Minister Tito Mboweni.

Finance Minister Tito Mboweni explained the new regulatory group will dedicate resources toward a governmental response to cryptocurrencies and the technology’s surrounding economy. Mboweni detailed the group plans to publish a study of its findings and some of the working group’s ideas toward a unified cryptocurrency regulatory standard throughout South Africa. Mboweni said: It is anticipated that, following broad industry comment and participation, the crypto assets regulatory working group will be ready to release a final research paper on the subject during the course of 2019.

Crypto-Taxation Is Still Difficult and Needs Reform

Mboweni further explained that Sars was having a hard time trying to track the number of capital profits and losses declared on cryptocurrency investments throughout the year’s collection of income tax return forms. Mboweni believes provisions must be added so South African taxpayers can declare the earnings and losses citizens record annually with these types of financial instruments. Work is underway within Sars to consider the amendment of the tax forms for the 2019 tax season in order to cater for the description of other assets by means of a specific description field on the form.

Research from Luno suggests 70 percent of South Africans have heard about virtual currencies, and most people have been using them as a hedge against inflation.

Taxpayers who have made some form of declarations regarding cryptocurrency trades have captured such trade as a form of other trade income or other trade loss, and have made reference to a description of digital/cryptocurrency trading (e.g. BCH, LTC, ETH, ZEC to name a few). The recent Taxation Laws Amendment Bill of 2018 details how cryptocurrencies should be treated when it comes to filing income tax and VAT records in South Africa. Mboweni concluded that the amendments proposed in that bill would bring better efficiency to the tax office as cryptocurrencies grow more popular in the region. The amendments should clarify whether or not cryptocurrencies can be classified for personal use or for taxes involving capital gains.

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