South Africa features in the top 20 countries in the world, in terms of crypto adoption. Also, in a first, crypto trading in the country recently exceeded $141 million levels.
Having said that, a local report claimed that South African pension funds will be barred from including Bitcoin and other crypto offerings under new draft guidelines. If the proposal is accepted after the public-comment deadline on 12 November, no pension fund may “invest in crypto-assets directly or indirectly.”
Previously, Regulation 28 of the Pension Funds Act assumed an investment up to 2.5% to “other assets,” which could have included cryptocurrencies. However, changes to the Act will explicitly ban crypto investments, as per the report.
Scams on the rise?
What’s alarming to the regulators is how an increasing number of investors are relying on peer communities for investment advice rather than financial experts. This also resulted several crypto scams, two major ones stemming out of South Africa.
Recently, Eva Crouwel, head of global financial crime at Luno, had noted in a podcast that the elderly were becoming a soft target of crypto scams out of its 2 million users in South Africa.
The country is also dealing with other compliance issues. Last month, the country had created a special spot for declaring held crypto-assets for taxation purposes.
But, the regulators have recently taken note of non-compliance with regard to crypto-assets. Thomas Lobban, Head of Crypto Asset Taxation at Crypto Tax Consulting said in a panel,
“Non-compliance is still proving to be an issue in the crypto asset space among South Africans…”
Another tax expert had also cautioned crypto traders, who boast about their gains on social media, of a possible crackdown by the South African Revenue Service (SARS). These could be attempts to air-tight the sector which lacks a regulatory framework in the country.
It is noteworthy that just last week, a leading bank had sent a termination notice to a crypto platform that offered arbitrage services to its clients.
It can be further speculated that lack of tax compliance on part of crypto investors, and the increasing scams in the sector have encouraged South African regulators to tighten the rules. Therefore, the country is expected to eliminate possible investment loopholes in the crypto sector and come up with further guidelines in the future.