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Crypto Exchanges& Regulation in South Africa

Top exchanges in South Africa by Coincub criteria
Article review author
Jonathan Lea
South Africa head image

Crypto Country Rating: 7/10

Institutional acceptance
Conservative outlook on crypto
Exchanges & Wallets availability
Leading exchanges and wallets available
Government regulation
Prioritising anti fraud and laundering measure rather than taking the initiative
Defi acceptance
Very much a debating point
Financial services
Cautious outlook, although blockchain technology viewed positively
Robust regulatory framework
Spending crypto
Wide range of outlets and retailers participating in cryptoeconomy
Banks activity in crypto
Banks not enamoured of cryptoeconomy

Bitcoin and crypto trading in South Africa

South Africa drops from 19 to 27. The country has strong scores for the percentage of the population owning cryptocurrency and the very high numbers of Bitcoin nodes – nearly 400 at the last count – plus an above-average Google search score for crypto. However, with some notable high-profile fraud cases in recent times, South Africa has had its fair share of scams – but not many countries haven’t. In response, South Africa’s financial regulator is planning a more cohesive regulatory framework covering crypto in order to minimize confusion and misunderstanding amongst the population regarding the potential risks and price volatility of holding crypto. These are issues South Africa needs to clear up. However, like many central banks around the world, the South African Reserve Bank is assessing the feasibility or otherwise of its own digital coin.

Spend Bitcoin and cryptocurrency trading in South Africa

The crypto economy in South Africa centers mostly around investment rather than peer-to-peer transaction activity, unlike many other African states. Decentralized finance may be a long way off but the crypto economy is booming within South Africa. Many locally based companies/shops/retailers – and worldwide brands – accept major cryptocurrencies as payment for goods and services by means of secure digital wallets. The services and products you can tap into range from restaurants and supermarkets to flights, car rental and hotels. IT products are well served but you’ll also find many traditional goods and services available.

Law and crypto trading in South Africa

The South African crypto economy has led to a significant number of fraudulent activities, hastening the need for firmer regulation. The latest laws are centered on a greater need for transparency with the aim of reducing the use of cryptocurrencies for criminal activities. To guard against money laundering and terrorist financing, the legislation looks to bolster customer identification and verification, with service providers required to keep records of customers and their transactions, especially cross-border flows. In addition, South Africa still wishes to limit its banks and other financial institutions’ involvement with crypto to protect against systemic risks.

Paying tax on my crypto trading in South Africa

Tax comes under the jurisdiction of the South African Revenue Service (SARS) and cryptocurrencies such as bitcoin are not considered to be currency or property, but ‘assets of an intangible nature’. Trading gains on your cryptocurrency counts as income, nonetheless, and tax has to be paid on it according to prevailing tax laws, in which case costs may be deducted, or tax allowable. Gains may also qualify for capital gains tax, under certain circumstances. In this case, the cost of purchasing the crypto is taken into account and set aside from the capital gains on any appreciation your crypto has made.

Tax relief, changing residency and gifting crypto coins in South Africa

Much depends on the regularity by which you buy and sell crypto, such as the length of holding it and the frequency of your trading. Under such circumstances, your crypto gains could count as revenue and be taxed at a maximum of 45% – or they could be deemed a capital gain and taxed at a less stress-inducing 18% maximum. Essentially the difference between the market value of the goods or services and the acquisition cost of the crypto would be subject to income tax (45%) or CGT (18%), depending on what type of current or investment account the crypto was held.

South Africa crypto mining regulations

Thinking of mining crypto? It’s a highly technical and expensive activity at the best of times. In South Africa, your mining gains are also subject to income tax. The initial receipt of the mined cryptocurrency is treated as income for tax purposes and any disposal, whether by cash or exchange transaction, comes under a different set of tax rules. If deriving crypto from mining the gains would be subject to income tax of 45% as they would be classified as a trade.

Planning your retirement and investing in cryptocurrency in South Africa

Cryptocurrencies such as bitcoin are not excluded from diversified investment portfolios. However, there have been some well-publicized scams in South Africa, one of which involved a fraud of around $3.6 billion in bitcoins, so tread carefully. In line with the South African government advising banks and financial institutions to avoid crypto, many long-term personal retirement funds would not recommend it for retirement planning due to price volatility. Those that are able to offer them will seek correspondingly higher fees and are more likely to cater for high net worth individuals.

South Africa’s financial services’ outlook on bitcoin and crypto economy

South Africa’s crypto economy is buoyant but, as with other countries that have seen crypto take off, the reaction from the financial community is mixed, especially from mainstream banks that wish to protect their customers’ interest against loss. The result is that South Africa looks to protect banks’ exposure to crypto, and the stability of the financial system as a whole takes priority. Financial regulators in other African countries such as Nigeria and Kenya have already banned banks from processing transactions relating to cryptocurrencies.

South Africa and DeFi, the latest developments

According to many observers, South Africa could be one of the leaders in Decentralized Finance (DeFi), and there is much debate on the subject. However, like most countries, the assessment of it is ongoing and subject to much debate. Decentralized finance is still strongly associated with virtual transactions and outside of the requirements of the mainstream economy, even though blockchain is recognized as a potential game-changing innovation in the financial sector. At present, banks, governments and financial services are still the means by which any digital banking revolution will take place.

Crypto security, transparency and compliance in South Africa

Regulators instigated a more robust crypto regulatory framework, with the South African Revenue Service (SRAS) expanding its cryptocurrency audit and detection services. This new framework focuses on establishing Know Your Customer (KYC) protocols for crypto exchanges and surveillance of virtual assets to prevent money from being laundered. There are also investor protection guidelines and rules for managing capital risk. Increasing identification is required for crypto trading with the SRAS able to request identity and transaction details from crypto service providers. Remember, some exchanges carry insurance against loss, but it is up to individuals to ascertain how much protection is offered by a given exchange.


New to crypto? Here’s our guide!

FAQ Image #1 01 Why Bitcoin? It seems like the buzz around Bitcoin just keeps growing. Bitcoin is a constantly evolving technology with a passionate community. What is it about the digital asset that makes it such a controversial topic and attractive investment?
FAQ Image #2 02 How to Get Started with Bitcoin It can be difficult to get past the technical jargon surrounding bitcoin (BTC) and other cryptocurrencies in order to figure out how you can buy and store them. Beginners can purchase Bitcoin, for example, on many exchanges using fiat currency like U.S. Dollar, Euro or British Pound.
FAQ Image #3 03 Blockchains 101 Blockchains are a type of database where data is stored in blocks that are chained together. As new data comes in, it is entered into a block, which is then chained to the previous block. The Bitcoin blockchain serves as a ledger that records every Bitcoin transaction in history.
FAQ Image #4 04 Bitcoin in the Real World Ok - you’ve found an exchange, bought your Bitcoin, and stored it safely. What’s next? By now you can buy just about anything with Bitcoin if you try hard enough, from Amazon gift cards to an old master painting. You can also convert your BTC to fiat with ATMs, an exchange, and more.

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