South Africa is urging regulators to classify digital assets as onshore to facilitate growth within the sector. Current regulations do not categorize these assets, creating investment limits for retail investors in offshore assets. Marius Reitz from Luno highlights that this ambiguity hinders institutional investment. The South African Reserve Bank warns against transferring assets internationally, imposing severe penalties. Consequently, retail investors dominate the activity in this market.
In recent years, South Africa has intensified its digital asset licensing and regulatory framework. However, a significant oversight remains as local exchanges argue that clarifying whether digital assets are categorized as onshore or offshore could catalyze growth within the industry. Currently, these assets exist in a regulatory gray area that does not classify them distinctly, unlike other investment instruments such as local government bonds and real estate, which are recognized as onshore assets.
The classification of digital assets influences the investment capabilities of South Africans. Presently, domestic laws limit retail investments in offshore assets to R1 million (approximately $54,500), with potential expansion to $545,000 upon tax clearance. Conversely, there are no such restrictions for onshore assets, thereby highlighting the urgency for regulatory clarity surrounding digital assets.
Marius Reitz, Africa’s general manager at Luno exchange, has emphasized that the prevailing regulatory uncertainty obstructs sector growth, particularly for institutional investors with significant capital. Reitz has urged regulators to classify digital assets as onshore assets, stressing the necessity for pro-growth policies amidst fiscal constraints. He noted, “Internationally, cryptocurrencies are now just another recognised asset class to invest in along with stocks, government bonds and fiat currencies.”
A key concern is that transferring digital assets from a local platform to an international exchange may lead to severe penalties, as stated by the South African Reserve Bank (SARB) in a 2021 guidance document. Violations of the Exchange Control Regulation could result in up to five years imprisonment or fines reaching $13,600. Such risks have deterred many institutional investors, reflected by data from the Financial Sector Conduct Authority (FSCA), which revealed that 71% of digital asset activity in South Africa is conducted by retail investors.
In conclusion, South Africa’s need for regulatory clarity concerning digital assets is critical for fostering growth within the sector. By classifying these assets as onshore, the government could alleviate investment restrictions and stimulate increased participation from institutional investors. Addressing this regulatory ambiguity is essential for unlocking the potential of digital assets in the South African market.
Original Source: coingeek.com
