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Interest in Cryptocurrency is progressively growing in Africa. According to some economists, it is a disruptive innovation that will blossom on Africa. If you are planning to establish a white label crypto exchange software development company or white label crypto exchange, you need to have a look at the Cryptocurrency compliance that this continent has to offer.
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Introduction Africa • The government of Africa has been a bit slow with the adoption of cryptocurrencies. Maybe it is due to the reasons like good attentions of protecting their people or having a crop of old leaders who have not to envision a future without paper cash, Africa is now slowly picking up the pace towards the era of Cryptocurrency. • The majority of the younger generation of the popular countries of Africa, like Nigeria, Kenya, Egypt, and South Africa, is investing their time in the Bitcoin Technology, disregarding the regulation skepticism on the continent. • The Central Bank of Nigeria has kept itself away from the Bitcoin movements twice and even warned the citizens that bitcoin investments had no legal intention. Furthermore, there seem to be no crypto exchanges established in Botswana. Bitcoin trading is also restricted to private Facebook and Whatsapp groups. The Bank of Gana also announced that use and trading Cryptocurrency is illegal yet or it is not considered as a lawful form of currency in the country. However, the Governor of the Bank of Ghana has issued Payment Systems and Services Bill, which will enable the regulation of Cryptocurrency in the future.
Introduction Africa • The Central Bank of Nigeria first reacted to virtual currencies in January 2017 and warned the citizens to handle cryptocurrencies at their own risks. Some of the people misunderstood the warning as a ban, but officials of the Bank have since declared that they cannot put a full stop on the usage of Bitcoin because it is quite evident that they are not within their control. • South Africa, Ghana, and Nigeria are amongst those countries that have managed to count amongst the top 10 ranked names for Bitcoin technology across the globe. • In the following section, we have discussed the Cryptocurrency regulation outlook in these African countries along with a few others. Let’s get started!
South Africa • SARS also argued that cryptocurrencies must be taxed based on the intention with which they are being held. Therefore, profits and losses regarding cryptocurrencies can be widely categorized as having three major outcomes that are mentioned as follows: South Africa • The government in South Africa is less strict regarding the trading of the Bitcoin. The South African Revenue Services has been discovering many ways in which Cryptocurrency investments can be appropriately taxed. In April 2018, SARS (South African Revenue Services) stated that the citizens of South Africa should reveal their income derived from Cryptocurrency investments as an integral part of their capital profit statement. • Investors trading cryptocurrencies on exchanges will be liable for the capital profits earned during investments. • A Cryptocurrency can be obtained via mining but until the newly obtained Cryptocurrency is exchanged or sold for cash, it will be managed by the miner as trading stock. • The normal barter transaction regulations will apply where services are exchanged for cryptocurrencies.
Ghana • In January 2018, the Bank of Ghana declared that buying and selling Bitcoin in the Country is not yet lawful as it isn’t a recognized lawful tender. The BOG also wants to notify the citizens that these activities in digital currency are licensed currently under the Payments System Act 2003. Currently, the Bank is investing a lot of resources to modify further the settlements and payments system, including e-form of money and to launch cybersecurity guidelines to protect online financial transactions. • In this country, more than 80 percent of landlords lack official title deeds with Ghana’s Land of Commission and most of the land is being held via verbal agreements. In order to solve this issue, start-up Bitland of Ghana is making use of blockchain technology to mirror official title deeds, elevating the integrity of the land records that are held by the Land Commission of Ghana. Ghana
Kenya • Digital currencies remain booming in Kenya. The law of Kenya does not have a regulatory framework for a blockchain. However, the National Land Commission of Kenya has welcomed the idea of blockchain network usage in creating transparency of land ownership, since it will boost fraudulent sales of land and blur over the title to land. • After the governor of Central Bank of Kenya compared bitcoin to a pyramid scheme in 2017, there are some proofs that the bank may be wishing to soften its position going forward. In 2018, President of Kenya, Uhuru Kenyatta had directed that AI taskforce and Blockchain can be created to discover the utilization of these technologies with the existing economic framework of Kenya. Furthermore, the Capital Market Authority, and Central Bank of Kenya, Societies Regulatory Authority and Insurance Regulatory Authority are due for a meeting to discuss who they can regulate virtual currencies. • Another initiative was taken in the private sector of Kenya – it launched TMT Global Coin, a logistics company powered by blockchain that believes in improving cargo logistics globally by utilizing blockchain technology via smart contracts to enhance the authenticity and transparency of records in exports and imports. Kenya
Nigeria • Nigeria is counted amongst the largest economies of Africa. Many times, Nigeria has warned the citizens, as well as the local banks, regarded doing business with Crypto exchanges. Nonetheless, with the economy embracing stability over the past couple of months in 2018, the head of Bank, Musa Jimoh, revealed has started looking into these virtual currencies from a policy point of view. • Despite such warnings, a Ponzi scheme related to Bitcoin resulted in around 12 million residents of Nigeria who lost a combined $50 million in early 2017. • Furthermore, the Nigerian Deposit Insurance Corporation also warned the citizens of Nigeria – they would not be afforded protection for customers or insurance from the NDIC when buying and selling in cryptocurrencies since the Central Bank of Nigeria has not issued virtual currencies. In addition to this, NDIC also stated that none of the central banks will accept digital currency as an alternative for its national currency when it is not capable of controlling it. • Despite the above responses by The Central Bank of Nigeria and the NDIC, Nigeria keeps the world’s third-largest holdings for Bitcoin as the percentage of gross domestic product. Nigeria
Mauritius • Mauritius issued an open call to trendsetters to take benefit of its new Regulatory Sandbox License in May 2017. But it was required that applicants should ensure their project is innovative, advantageous to the economy of Mauritius, and cannot be accommodated in the home jurisdiction of trendsetter due to regulatory or legal gaps. The government of Mauritius is specifically looking for some impressive fintech startups and strives to be recognized as Ethereum Island. • In February 2018, the Innovation-Driven Financial Services Regulatory Committee and the Fintech met to make recommendations to Mauritius’ government on the requirement to launch new sets of regulations for innovation and fintech. • However, there has been no such lawsuit or court action reported in Mauritius yet. Mauritius
Cryptocurrency Taxation Outlook • A draft, named TLAB (Taxation Laws Amendment Bill) has been issued and suggests several amendments to the Income Tax Act (1962) and the VAT Act 89 (1991), which looks for clarifying the current provisions that are dealing with crypto assets in the South African tax regulation. • Under the Value Added Tax Act 89 of 1991, it is suggested to amend section 2 to be added in the definition of financial services, the collection, acquisition, issue, trading, or transfer of ownership of any digital or crypto asset. Consequently, if the suggestion concerning the Value Added Tax Act is accepted, all dealings related to crypto-assets will be supposed to be exempt from VAT in terms of the VAT Act’s section 12. • Under the Income Tax Act 58 of 1962, it is suggested that crypto-assets be added in the description of the Financial Instrument. Nonetheless, it is also suggested to amend the Income Tax Act’s section 20A, to add the acquisition of any crypto assets beneath the ring-fencing of accessed loss provisions. If this suggested is permitted, dealers of crypto assets will be able to offset the losses incurred from dealing in crypto assets from other trades.
Cryptocurrency Taxation Outlook • The attention behind these suggested amendments to the tax regulation is to clear out the tax treatment of crypto assets under the tax regulations. From the perspective of an income tax, crypto-assets should be treated as financial instruments for income tax, and from the perspective of Value Added Tax, the collection, issue, trading, acquisition, and transfer of crypto assets ownership should be treated as a financial service.
Final Thoughts • Interest in Cryptocurrency is progressively growing in Africa. According to some economists, it is a disruptive innovation that will blossom on Africa. Every country in the continent has a different approach towards regulation cryptocurrencies or Cryptocurrency exchanges or Bitcoin trading. If you are planning to establish a white label crypto exchange software development company or white label crypto exchange, you need to have a look at the Cryptocurrency compliance that this continent has to offer. Furthermore, the taxation outlook for Cryptocurrency is also very important to be understood especially if you are planning to get white label bitcoin exchange software.
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