This is actually a good news story highlighting those that are trying to regulate crypto having no clue what they are doing mainly through ignorance of not unsteadying what crypto is. I have written about this case before, but it was interesting to see some further insight from PWC and how things have changed with people not involved with crypto now using crypto to move funds out the country bypassing the FOREX laws.
The reality is if the right regulation frame work is not in place there can be no policing of digital assets leaving many loop holes to fly under the radar. Being in crypto we have to be up to date with the latest regulations in order to stay ahead of the law wherever possible or be compliant.
South Africa has very strict FOREX regulations as the government would like to hold onto the dollars and when a business needs FOREX to purchase goods or services outside of the borders they have to obtain permission and this can be denied as I have witnessed this first hand. In this country you can move money without using a bank and many businesses do just that. Crypto is now an easier and quicker route without anyone being the wiser for now that is.
A recent court case between Standard Bank and the South African Reserve Bank ended up with the court ruling that crypto currencies cannot be treated in the same way as FIAT and different rules have to be applied. Standard Bank's client had their funds confiscated by the state having allegedly bypassed exchange controls when purchasing Bitcoin which with this ruling showed they had not. This ruling has been suspended and is on appeal which is great as this is all in the air until this is finalized. I do not expect the appeal to succeed so this will buy more time whilst the confused will be even more confused.
Standard bank argued that the crypto purchases of their client did not contravene South Africa's control exchange regulations as crypto was not classified as either currency or capital. The court stated that crypto fell out of the boundaries when it came to current exchange regulations.
PWC believe this ruling has bought temporary relief for crypto investors in South Africa when it comes to foreign exchange controls. As we know crypto currencies provide the vehicle for vast amounts of money moving out of the country bypassing any exchange regulations. There is no permission required as crypto does not fit into any of the categories specified and cannot be considered as illegal transactions.
After having years of heavy foreign exchange regulation the capital outflows via crypto cannot be enforced and all it means is money is pouring out the country. Crypto investors can leave their funds outside the borders without any fear of being prosecuted.
How long do we have in South Africa depends on when the appeal date is and how long this takes as only then can the SARB put into place any new crypto regulations. I do not see this happening this year and hope it is next year giving myself some more time to move between the grey area and at least be established financially outside the borders. What is telling is how quickly the SARB appealed the courts decision and instead of finding a solution embracing crypto innovation they have gone in the opposite direction trying to gain back control. Little do they know enforcing this new technology is not going to be straight forward and grey areas will exist due to how quickly this technology changes.
I have not touched Binance since I saw they added a new clarification box for deposits and withdrawals and just do not trust this. Nothing has changed since April when this was introduced and how do we know that this information is not being handed over to the tax people? Binance say they are not and have done this in preparation only, but they could be gathering data from any transactions and when their exchange license is issued they could hand over all the files. The SA taxman apparently has introduced "nudge" letters which I will research and discuss in another post.