Bitcoin's onshore position in South Africa needs clear regulatory guidance, according to Luno's CEO.
South Africa is considering a significant shift in its approach to cryptocurrencies, with the National Treasury contemplating the classification of Bitcoin as an onshore asset. This move could have profound implications for institutional investors and the government's tax revenue.
For institutional investors, this classification would mean that Bitcoin would fall under the regulatory and tax jurisdiction of South Africa, requiring compliance with local onshore asset regulations. This clarity and legitimacy could potentially encourage more institutional participation, reducing legal uncertainty. The classification would also mean that Bitcoin holdings and transactions are treated like domestic assets, potentially affecting investment reporting, capital controls, and compliance obligations. Moreover, the clearer integration into financial portfolios and conventional asset management frameworks could increase institutional interest in Bitcoin.
The implications for tax revenue are equally significant. The classification would enable the South African Revenue Service (SARS) to tax Bitcoin transactions, gains, and holdings as onshore assets, potentially increasing tax collections from capital gains tax, income tax, or other applicable taxes. This would improve transparency and monitoring of crypto-related financial flows through existing onshore tax frameworks and reporting requirements. The broadening of the taxable base could also be a result, as institutional and retail investors declare crypto assets in their financial statements and tax returns.
The proposed classification aligns South Africa with other jurisdictions that treat cryptocurrencies as taxable and regulated assets, supporting formal financial sector development and government revenue. While the South African government has not yet issued official statements on this matter, the inference follows from the international patterns and tax regulation principles observed globally in jurisdictions treating Bitcoin as an onshore asset.
Paul Harker, Global Head of Legal and Corporate Strategy at Luno, has been advocating for this change, stating that there is 'significant capital' on the sidelines waiting to be pumped into Bitcoin, a chunk of which could find its way to government coffers via taxes. As such, in providing asset management services, the exchange gets regulatory leeway to invest more money in assets classified as onshore rather than offshore, in line with regulations in the country.
It is important to note that while the regulatory clarity on digital asset ownership and usage is still evolving, with multiple pieces of legislation shaping the process, the Financial Sector Conduct Authority (FSCA) responsible for issuing these licenses has approved the activities of 248 crypto firms early in 2025.
In conclusion, classifying Bitcoin as an onshore asset will likely boost institutional investor confidence by providing regulatory clarity and increase South Africa's tax revenue through formalized crypto-asset taxation and reporting. This move aligns South Africa with the global trend of treating cryptocurrencies as taxable and regulated assets, supporting the growth of the formal financial sector and government revenue.
[1] This article does not contain direct excerpts from the South African government on this matter. However, the inference follows from the international patterns and tax regulation principles observed globally in jurisdictions treating Bitcoin as an onshore asset.
- The classification of Bitcoin as an onshore asset in South Africa would place it under the regulatory and tax jurisdiction of the country, necessitating compliance with local onshore asset regulations.
- The potential clarity and legitimacy provided by this classification could attract more institutional investment in Bitcoin, reducing legal uncertainties.
- With Bitcoin being categorized as a domestic asset, investment reporting, capital controls, and compliance obligations may be affected.
- The taxation of Bitcoin transactions, gains, and holdings as onshore assets in South Africa could lead to improved transparency, increased tax collections, and a broader taxable base.
