Luno Calls for Bitcoin to Be Classified as an Onshore Asset in South Africa
The South African cryptocurrency industry is urging the National Treasury to officially classify Bitcoin as an onshore asset when held by locally licensed cryptocurrency exchanges.
The move, proponents argue, would bolster Bitcoin’s status within the country’s financial regulatory framework, fostering greater institutional adoption and increased investment.
Luno, a Digital Currency Group-owned cryptocurrency exchange, has been at the forefront of this push, advocating for a policy shift that would align South Africa with global financial trends. According to Luno’s global head of legal and corporate strategy, Paul Harker, Bitcoin should be recognized as a standard investment asset alongside traditional instruments like stocks, government bonds, and fiat currencies.
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“Internationally, cryptocurrencies are now just another recognized asset class to invest in along with stocks, government bonds, and fiat currencies,” Harker stated.
A Shift Towards Economic Growth
Industry leaders argue that amid South Africa’s constrained fiscal environment, forward-looking decisions are crucial to unlocking new economic opportunities. A formal classification of Bitcoin as an onshore asset, they say, would provide regulatory clarity, attract institutional investors, and ultimately increase tax revenue without imposing additional costs on the fiscus.
Luno warns that without such reforms, South Africa risks lagging behind other nations that have embraced digital assets as part of their financial ecosystems.
“Ordinary South Africans and the fiscus have yet to experience the true benefit of the digital asset revolution that has boosted the economies of many other countries,” Luno noted in a statement.
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Regulatory Uncertainty and Tax Implications
South African regulators have historically taken a cautious approach to integrating cryptocurrencies into the financial system. In October 2022, the Financial Sector Conduct Authority (FSCA) designated crypto assets as financial products under the Financial Advisory and Intermediary Services (FAIS) Act. This move was a key step toward increased oversight, enhanced consumer protection, and greater clarity on taxation.
However, crypto assets in South Africa remain in a regulatory gray area, classified as neither onshore nor offshore assets. This ambiguity, Luno argues, complicates the reporting of cross-border crypto transactions to the South African Reserve Bank (SARB).
By treating Bitcoin as an onshore asset, Luno claims that profits from crypto investments could be reinvested locally, contributing to economic growth and expanding the country’s tax base.
The Reserve Bank’s Stance on Bitcoin
The South African Reserve Bank has remained measured in its approach to cryptocurrency regulation. While the Intergovernmental Fintech Working Group has been working on a comprehensive regulatory framework, SARB has yet to make a definitive ruling on whether digital assets should be classified as domestic or foreign for capital flow management purposes.
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“The classification of crypto assets as domestic or foreign for capital flow management purposes will form part of a framework to be decided on in due course,” SARB told TechCentral.
Despite this, SARB has been clear in its reluctance to grant Bitcoin the same status as fiat currency. Proposals to include Bitcoin in South Africa’s strategic national reserves have been dismissed by SARB Governor Lesetja Kganyago, who has expressed skepticism about cryptocurrencies replacing traditional monetary systems.
Calls for Accelerated Action
Luno has urged policymakers to act swiftly, emphasizing that regulatory delays could hinder South Africa’s ability to fully capitalize on the potential of digital assets.
“Luno acknowledges the forward strides already made in South Africa’s regulation of digital assets,” the company stated. “But ordinary South Africans and the fiscus have yet to experience the true benefit of the digital asset revolution.”
Also read: South Africa Issues Crypto Licenses: Luno and Zignaly Lead the Way
With global financial institutions increasingly incorporating digital assets into their portfolios, the pressure is mounting on South African regulators to define a clear path for the country’s crypto sector. As discussions continue, the future of Bitcoin’s regulatory status in South Africa remains a key issue for policymakers, investors, and industry stakeholders alike.
