However, in December 2014 the South African Reserve Bank (SARB), issued a position paper on ‘virtual currencies‘ which stated that only the SARB may issue legal tender and that ‘decentralised convertible virtual currencies’ (DCVCs), including bitcoin and litecoin, are not legal tender in South Africa.
In effect, the paper was saying ‘crypto is nothing to do with us, and as such you are getting involved at your own risk. From the current SARB website:
Crypto assets are not legal tender in South Africa, so any merchant or beneficiary may refuse them as a means of payment. These assets are not guaranteed or backed by SARB as they operate independently from the central bank and users are alerted to the potential risk of fluctuation in the value of crypto assets.
There are currently no dedicated laws or regulations that specifically govern the use of crypto assets in South Africa and, therefore, no regulatory compliance requirements exist for local trading of these assets.
Legal protection or recourse to users, traders or intermediaries of crypto assets therefore depends on general common law principles. Dealing in crypto assets is performed at the end-user’s sole and independent risk. Initial coin offerings are related to crypto assets and their use are also unregulated and unsupervised by the SARB.
While there are no direct laws regarding the legality of crypto as an asset, that doesn’t mean that they aren’t taxed. How SARS treats crypto returns will depend on how long you have held them – more information can be found in our South Africa crypto tax article.
What could change in the future
At the time of writing of SARB’s paper in 2014, the global market cap of Bitcoin was around $6.5bn and SARB stated that they did not feel that Bitcoin and other virtual currencies were significant enough to be ‘systemic’ ie. they were too small to require attention.
However, at the time, SARB also stated that it “reserves the right to change its position should the landscape warrant regulatory intervention”.
Today, Bitcoin’s market cap is somewhere between $600bn – $1trn (you can see the current market cap here), depending on how the market is going (see current bitcoin marketcap here), and Bitcoin is now well established as a legitimate store of value, as well as increasingly the target of scams.
It’s been 7 years since the paper was published and much as changed with bitcoin and other virtual currencies. As crytopcurrencies continue to grow in popularity and as other uses of them are developed through DeFI, etc, we expect SARB to review their position, and will update this page when they do to ensure it is current.