Crypto regulations - friend or foe?
In this easy step-by-step introduction to the world of crypto, whether you are just starting out or if you have taken a bite, your questions will be answered, we look at regulations - friend or foe.
Your guide through the series, presenter of Business Unusual on 702 and CapeTalk’s The Money Show Collin Cullis, says ‘the founding principle of bitcoin was it did not need a so-called trusted third party to operate.’
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You're listening to episode two. If you've missed the first, third and fourth episodes, catch up below:
- Episode 1: Crypto explained - a guide to understanding digital money
- Episode 3: To invest now or later - can one time the cryptocurrency market?
- Episode 4: What makes crypto so volatile, is it Elon Musk?
The entire system was to be regulated by the public ledger blockchain. This was to ensure everyone could see everything says Cullis.
But crypto proved to have a shady side, used for dodgy exchanges, illegal activity, and even terrorism.
“It’s little wonder that governments around the world have been wary of letting things get out of control.”
Cullis chats to Revix CEO Sean Sanders to help you understand the key issues around regulation in the crypto space.
Are regulations needed to keep your investment safe?
“Cryptocurrency is hard to get regulated in South Africa. Crypto doesn’t fall into a very traditional bucket.”
It does not fit into the usual stocks, properties, and commodities categories, he says.
South Africa has fallen pretty far behind the rest of the world when it comes to regulations, Sanders believes.
So, what is a regulator's job at the end of the day?
“It is to protect the consumer, and we don’t have that,” he notes.
“At this point in time in this country, we still do not know how to grapple with this emerging asset class.”
Countries such as the United Kingdom (UK) have a more non-interference approach that he thinks works. The UK just ensures that the parties involved in crypto transactions are legit to prevent any criminal or terrorist activity.
“That to me seems to be a progressive approach.”
You can’t put cryptocurrencies under the same financial framework as stocks, he insists.
Progressive and innovative regulations are needed in South Africa for the sector to flourish and grow the economy says Sanders.
Government needs to meet the private sector halfway.Sean Sanders, CEO - Revix
Sanders supports regulation to monitor the inflows and outflows of rands to cryptocurrency and cryptocurrency to rands to prevent any criminal or terrorist financing through crypto in the way the UK is doing, he says.
He also backs the need for custody of cryptocurrency and ensuring it is properly stored.
“As an exchange have the fiduciary responsibility to look after your customers' cryptocurrency in the best way possible.”
What regulations does he believe hampers the development of the crypto industry?
Exchange controls are a big no-no he says.
Exchange controls in South Africa are so outdatedSean Sanders, CEO - Revix
“South Africa has this objective for 2025 to be among the top 50 best places in the world to do business and there is no way we are going to get there with exchange controls.”
When is the right time to invest in crypto?
“I’m super biased but in my opinion, there is no better time to invest in crypto than right now, insists Sanders.
Rather look at the long-term trajectory of cryptocurrency he says. The short-term noise should not be the focus.
What are the tax implications on crypto investments?
In South Africa, the South African Revenue Service (SARS) does not require any crypto-related gains.
Sanders sees this as a problem and explains why.
Calculating taxes is never simple he says, and crypto taxes are equally complicated. He hopes that within the next few years the platforms will be responsible for this, but right now the consumer is responsible for reporting gains or losses to SARS.
The two main gains to look out for are capital gains and marginal tax gains but check with your tax consultant for further advice, he suggests.
“If you hold crypto for more than a year you will have a lower tax rate, but if you hold it for less than a year you go into this marginal tax bracket where you will get taxed on your income tax bracket you are currently in.”
So long-term over short-term crypto investment is probably a better choice he notes.
He says Revix works with international counterparts in countries like Germany, Switzerland, and Singapore who are doing a great job of regulating crypto and fostering the industry.
So South Africa could potentially leap-frog from where they currently are and introduce regulations that would foster innovation in this country as well.Sean Sanders, CEO - Revix
Sanders touches on the concerns around identity theft in the crypto space.
He says like any market offering high returns it attracts scammers.
“There are a lot of platforms which are not reputable, so do your homework”.
Fishing is a big danger. He says choose your passwords carefully and change them often.
Exchanges or platforms like Revix are good for trading, but are not experts in the custody of cryptocurrency, he notes, and that is where exchanges need to be using third-party professional custody partners.
“If the exchange is not doing so, you should not be investing with them.”
Visit Revix to find out how easy it is to start investing in this exciting new space.
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