South Africa is pushing for digital assets to be classified as onshore assets to enhance investment options. Currently sitting in regulatory limbo, the lack of classification limits growth potential for institutional investors. Local laws restrict offshore investments, presenting an opportunity for unimpeded onshore asset growth. Regulatory clarity could lead to increased participation in the digital market and alleviate current legal risks.
South Africa has increased its efforts towards regulating digital assets, yet a significant aspect remains unaddressed: the classification of these assets as onshore or offshore. Currently, digital assets sit in a regulatory grey area, unlike local government bonds, real estate, and retirement plans, which are all classified as onshore assets. In contrast, assets like foreign bank accounts are designated offshore.
This classification impacts the capacity of South Africans to invest; laws restrict offshore investments to R1 million ($54,500) for retail investors, with a maximum of $545,000 allowed through tax clearance. In contrast, there are no limits on onshore investments, creating a potential for unrestricted growth.
Marius Reitz, Luno exchange’s Africa general manager, noted that the regulatory uncertainty is stifling growth within the sector, particularly for institutional investors. He urged regulators to classify digital assets as onshore to facilitate substantial advancement in this emerging market, saying, “Internationally, cryptocurrencies are now just another recognised asset class to invest in along with stocks, government bonds and fiat currencies.”
Moreover, transferring digital assets to foreign exchanges poses legal risks; the South African Reserve Bank (SARB) has classified such transfers as violations of the Exchange Control Regulation. Those found in violation can face severe penalties, including imprisonment or substantial fines, which deter many institutional investors. Recent figures from the Financial Sector Conduct Authority (FSCA) show that retail investors make up 71% of digital asset transactions in the country.
South Africa’s call for regulation to classify digital assets as onshore could significantly enhance investment opportunities and growth in the sector. By eliminating regulatory ambiguity and expanding investment limits, the country could attract much-needed institutional investment. However, the current risks tied to transferring assets outside local platforms highlight the necessity for clarity in regulatory practices.
Original Source: coingeek.com
