South Africa Advocates for Onshore Classification of Digital Assets

South Africa is calling for the classification of digital assets as onshore assets to boost investment growth in this sector. Currently, digital assets exist in regulatory limbo, which hampers institutional participation. Clear guidelines are essential to enhance market confidence and activity.

South Africa has intensified its focus on digital asset regulations, emphasizing the need for clarity regarding the classification of such assets. Currently, digital assets exist in a regulatory gray area, being neither characterized as onshore nor offshore. This ambiguity contrasts with local assets, such as government bonds and shares, which are clearly regarded as onshore assets. In contrast, foreign investments fall under the offshore category, which comes with restrictions for retail investors.

Classifying digital assets as onshore would significantly influence South African investments. The local law enforces a cap of R1 million ($54,500) on investments in offshore assets for retail investors, which can be increased to $545,000 upon tax clearance. Conversely, there are no such limitations for onshore investments, which presents a valuable opportunity for growth in the digital asset sector.

Marius Reitz, the General Manager for Africa at Luno exchange, highlighted that the current lack of classification impedes growth, particularly for institutional investors with substantial capital. He urged regulators to classify digital assets as onshore assets, fostering an environment conducive to significant expansion in this emerging market. He stated, “Internationally, cryptocurrencies are now just another recognised asset class to invest in along with stocks, government bonds and fiat currencies.”

The absence of a clear classification poses a risk for investors who may unwittingly violate regulations. According to the South African Reserve Bank (SARB), transferring digital assets from local platforms to international exchanges is considered a breach of Exchange Control Regulations, which can result in severe penalties, including imprisonment and hefty fines. This regulatory risk has deterred many institutional investors, as evidenced by a recent report from the Financial Sector Conduct Authority (FSCA), which indicated that retail investors dominate 71% of digital asset activity in the country.

In conclusion, the classification of digital assets in South Africa is critical for fostering investment and growth in this sector. The current regulatory ambiguity prevents significant institutional engagement and limits retail investor activity. There is a pressing need for regulators to establish clear guidelines that classify digital assets, ideally as onshore assets, to unlock their potential and encourage broader market participation.

Original Source: coingeek.com