Bitcoin regulations in South Africa

Is bitcoin legal in South Africa?
Bitcoin is of interest to law enforcement, tax authorities, and legal regulators, all of which are trying to understand how it fits into existing frameworks.
The legality of your bitcoin activities will depend on who you are and what you are doing with it.
Bitcoin has proven to be a contentious issue for regulators and law enforcers, both of which have targeted the virtual currency in an attempt to control its use.
We are still early on in the game, and many legal authorities are still struggling to understand the cryptocurrency, let alone make laws around it.
Amid all this uncertainty, one question stands out: is bitcoin legal?
The answer is yes, depending on what you’re doing with it. Read on for our guide to the complex legal landscape surrounding bitcoin. Most of the discussion concerns the US, where many of the legal dramas are currently playing out.
What are the concerns about bitcoin?
Government agencies are increasingly worried about the implications of bitcoin, as it has the ability to be used anonymously, and is therefore a potential instrument for money laundering. In particular, law enforcers seem to be concerned about the decentralized nature of the currency.
As early as April 2012, the FBI published a document highlighting its fears around bitcoin specifically, drawing a distinction between it and centralized digital currencies such as eGold and WebMoney. It voiced concerns that while US-based exchanges are regulated, offshore services may not be, and could be a haven for criminals to use bitcoin for illicit activities without being traced.
Bitcoin has been commonly used as a form of currency when trading on Silk Road, an anonymous marketplace that can only be accessed over the TOR anonymous browsing network. Silk Road is commonly used to sell goods that are legal in many countries, including narcotics. This prompted US Senator Charles Schumer to call for the site to be shut down, explicitly linking it to bitcoin, which he called a “surrogate currency”. And the US Drug Enforcement Administration seized bitcoins from a US resident for purchasing a controlled substance in June 2013.
Who regulates it?
In South Africa bitcoin falls under the Financial Intelligence Centre Act 38 of 2001.
Regulators will vary on a per-country basis, but you can expect to see national financial regulators interested in bitcoin and other virtual currencies, potentially along with regional regulators at a sub-country level.
In the US, the Financial Crimes Enforcement Network (FinCEN), which is an agency within the US Treasury Department, took the initiative. It published guidelines about the use of virtual currencies. FinCEN’s March 18, 2013 guidance defined the circumstances under which virtual currency users could be categorized as money services businesses (also commonly known as money transmitting business or MTBs). MTBs must enforce Anti-Money Laundering (AML) and Know Your Client (KYC) measures, identifying the people that they’re doing business with.
What this means to you
The legality of bitcoin depends on who you are, and what you’re doing with it. There are three main categories of bitcoin stakeholder. Someone may fall under more than one of these categories, and each category has its own legal considerations.
These are individuals that obtain bitcoins, and either hoard them or spend them. Under the FinCEN guidance, users who simply exchange bitcoins for goods and services are using it legally.
FinCEN: “A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter.”
According to the FinCEN guidance, people creating bitcoins and exchanging them for fiat currency are not safe.
is bitcoin legal
FinCEN: “By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.”
Miners seem to fall into this category, which could theoretically make them liable for MTB classification. This is a bone of contention for bitcoin miners, who have asked for clarification. This issue has not to our knowledge been tested in court.
FinCEN: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.”
What is the industry doing?
The industry has responded to growing regulator concerns in several ways.
Several companies created a committee to form a self-regulatory body called DATA, designed to encourage open conversation with regulators.
The Bitcoin Foundation formed committees to offer legal guidance, steer policy, and liaise with regulators.
Exchanges have been attempting to secure MTB licenses at the state and federal levels, and some have avoided doing business with US customers until this is resolved.
Other countries
Germany
Germany is perhaps the most advanced country when it comes to regulating bitcoin and virtual currencies. Although some issues remain unresolved, the German government has exempted bitcoin transactions held for over one year from 25% capital gains tax. It also categorized bitcoin as a form of private money.
Thailand
In July 2013, reports suggested that Thailand had banned bitcoin. In fact, as some suggested, some of the exchanges were still trading, and the Bank of Thailand, which was the entity that was supposed to have banned bitcoin, doesn’t have the legal power to do so. As of August 2013, the Bank of Thailand was simply considering whether to give the exchange in question a license.
“Because they have not been granted a license this does not automatically mean that an individual in Thailand selling or buying bitcoins with a bitcoin exchange in another country, e.g. Mt. Gox, is breaking the law,” said Bank of Thailand Governor Prasarn Trairatvoraku.
India
India’s central bank is said to be “watching” bitcoin. It is gathering information in an attempt to understand the virtual currency, but has said that it is not interested in regulating it at present.
Canada
Canada has announced that it will tax bitcoins in two ways. Transactions made for goods or services will be treated under its barter transaction rules, while its Transactions in Securities document says that profits made on commodity transactions could be income or capital.