Legal Compliance & Taxation Outlook Of Africa - Espay Exchange

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TECH
NEWSLETTER

• Here is where your presentation begins

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Introduction

• 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.

Africa
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Introduction

• 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. Lets
  get started!

Africa
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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.

• 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

• 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.

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Ghana

• In January 2018, the Bank of Ghana declared that
  buying and selling Bitcoin in the Country is not
  yet lawful as it isnt 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 Ghanas
  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
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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
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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
  worlds third-largest holdings for Bitcoin as
  the percentage of gross domestic product.

Nigeria
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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
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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 Acts 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 Acts 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.

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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.

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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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