South Africa Advocates for Classification of Digital Assets as Onshore Assets

South Africa is advocating for the classification of digital assets as onshore assets amidst regulatory ambiguity. By doing so, it aims to enhance investment freedoms, especially for institutional investors, who are currently deterred by the risks associated with transferring assets internationally. Marius Reitz of Luno exchange highlighted the importance of this classification for facilitating growth in the digital asset sector.

In recent years, South Africa has enhanced its digital asset licensing and regulations; however, local exchanges highlight a significant issue that could facilitate industry growth. Currently, digital assets are stuck in a regulatory gray area, unclassified as either onshore or offshore. Local assets, including government bonds and listed shares, are categorized as onshore, while foreign investments, such as overseas bank accounts and foreign stocks, are classified as offshore.

The classification of digital assets is crucial, as it influences investment freedoms for South African citizens. Regulatory laws restrict retail investment in offshore assets to R1 million (approximately $54,500), but this limit can increase to $545,000 with tax clearance. Conversely, there are no such restrictions for investments in onshore assets.

Marius Reitz, General Manager for Africa at Luno exchange, emphasized that the existing regulatory ambiguity stifles growth, particularly for institutional investors prepared to invest substantial amounts. He urged regulatory authorities to classify digital assets as onshore, thus fostering significant expansion in the industry.

Reitz stated, “Internationally, cryptocurrencies are now just another recognised asset class to invest in along with stocks, government bonds and fiat currencies. In the current constrained fiscal reality, our government has little room to manoeuvre. Pro-growth and forward-looking decisions are essential,” as reported by My Broadband.

Presently, without clear classifications, transferring digital assets from domestic platforms to foreign exchanges poses risks. According to a 2021 guidance from the South African Reserve Bank (SARB), such transfers can breach Exchange Control Regulations, with offenders facing severe penalties, including imprisonment or substantial fines. This trepidation deters many institutional investors, a trend reflected in the Financial Sector Conduct Authority’s (FSCA) report, which revealed that retail investors constitute 71% of the digital asset market in South Africa.

The South African regulatory landscape for digital assets currently lacks clarity, defining these assets neither as onshore nor offshore. The classification is vital for investment freedoms and could catalyze growth in the sector, especially among institutional investors. Marius Reitz’s call for regulatory reform underscores the need for proactive measures to position South Africa favorably in the global digital asset marketplace. Without appropriate classification and regulations, the growth potential of this burgeoning industry remains severely constrained.

Original Source: coingeek.com