Cryptocurrency regulation is another logical step as the asset class
Cryptocurrency regulation is another logical step as the asset class gains popularity over time, and consumer protections become necessary.
The digital currency is changing the way we have been transacting throughout the years. It’ll soon become the norm; however, for some, it already is.
The recent survey conducted by Luno quotes a staggering 74% of South African respondents saying that they would like the option to pay for goods with the digital currency. With such a significant number of respondents, the days of an entirely unregulated system are numbered.
No doubt, there will be a unanimous favourability towards bringing the regulation in. It will fairly allow cryptocurrencies to be used properly in the financial system. In contrast to the existing scenario, this is where there’s no assurance as to the origin of funds, and the situation is the gift for anyone willing to transact without attracting the attention of the authorities. Thus, legislation will surely discourage those who’re buying illegitimate goods.
The first phase of the proposals, which is about getting everyone registered on the book if they’re offering crypto-asset services, is a good start. We believe that new regulations will perfectly align with the current overhaul by the Financial Services Conduct Authority that’s reshaping how financial services will be going forward.
Could Crypto Lose Its Shine?
Regulation is unlikely to influence the cryptocurrency value in the long run. With the value of an instrument which is based on its supply and demand, the regulations could have a stabilizing effect on the volatile crypto market. However, the vast majority of individuals won’t be affected by the regulations coming in.
There’s no doubt that the crypto space, in terms of taxation, will ultimately fall under the watch of the South African Revenue Service. The reality is, most of the countries are struggling to find money for themselves. There’s already a lot of sulking over cross-border taxation, with multinational firms moving profits into their region that are low-tax jurisdictions.
Comprehensibly, global tax authorities are looking to crack down on this practice to ensure that companies pay their fair portion of the tax. Therefore, it’s almost certain that digital currencies will be taxed in the future. There’s no way a government can afford to lose a huge taxable flow avoiding the fiscus.
It’s likely that if you exchange in a cryptocurrency in South Africa, then you will be taxed locally but you will need to transact in a regulated currency. In case you transact in an unauthorized cryptocurrency, then you could be going against the rules. However, it remains to be seen how the taxation process and proposed regulations will play out.
What Awaits?
When digital currencies are regulated, they will be treated the same as any other asset. In the case of divorce or death, cryptocurrencies would turn as a mess to sort out without some legal framework in place.
Keeping an eye on how jurisdictions are dealing with the process is something that needs to be motivated by the regulator. Though it will take time, yet it’s clear that, sooner or later, cryptocurrencies will be regulated. Once the comments have been considered, it will be interesting to see how the regulator determines the best way forward locally.