Legal Compliance & Taxation Outlook Of Africa - Espay Exchange
                     TECH
NEWSLETTER
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Introduction
● The government of Africa has been a bit slow with the adoption of 
cryptocurrencies. Maybe it is due to the reasons like good attentions of 
protecting their people or having a crop of old leaders who have not to 
envision a future without paper cash, Africa is now slowly picking up the pace 
towards the era of Cryptocurrency.
● The majority of the younger generation of the popular countries of Africa, like Africa
Nigeria, Kenya, Egypt, and South Africa, is investing their time in the Bitcoin 
Technology, disregarding the regulation skepticism on the continent.
● The Central Bank of Nigeria has kept itself away from the Bitcoin movements 
twice and even warned the citizens that bitcoin investments had no legal 
intention. Furthermore, there seem to be no crypto exchanges established in 
Botswana. Bitcoin trading is also restricted to private Facebook and Whatsapp 
groups. The Bank of Gana also announced that use and trading 
Cryptocurrency is illegal yet or it is not considered as a lawful form of currency 
in the country. However, the Governor of the Bank of Ghana has issued 
Payment Systems and Services Bill, which will enable the regulation of 
Cryptocurrency in the future.
Introduction
● The Central Bank of Nigeria first reacted to virtual currencies in January 2017 
and warned the  citizens to handle cryptocurrencies at their own risks. Some 
of the people misunderstood the warning as a ban, but officials of the Bank 
have since declared that they cannot put a full stop on the usage of Bitcoin 
because it is quite evident that they are not within their control.
● South Africa, Ghana, and Nigeria are amongst those countries that have Africa
managed to count amongst the top 10 ranked names for Bitcoin technology 
across the globe.
● In the following section, we have discussed the Cryptocurrency regulation 
outlook in these African countries along with a few others. Let’s get started!
 South Africa
● The government in South Africa is less strict regarding the trading of the 
Bitcoin. The South African Revenue Services has been discovering many 
ways in which Cryptocurrency investments can be appropriately taxed. In April 
2018, SARS (South African Revenue Services) stated that the citizens of 
South Africa should reveal their income derived from Cryptocurrency 
investments as an integral part of their capital profit statement.
● SARS also argued that cryptocurrencies must be taxed based on the intention 
with which they are being held. Therefore, profits and losses regarding South Africa
cryptocurrencies can be widely categorized as having three major outcomes 
that are mentioned as follows:
 Investors trading cryptocurrencies on exchanges will be liable for the capital 
profits earned during investments. 
 A Cryptocurrency can be obtained via mining but until the newly obtained 
Cryptocurrency is exchanged or sold for cash, it will be managed by the miner 
as trading stock.
 The normal barter transaction regulations will apply where services are 
exchanged for cryptocurrencies.
 Ghana
● In January 2018, the Bank of Ghana declared that buying and selling Bitcoin 
in the Country is not    yet lawful as it isn’t a recognized lawful tender. The 
BOG also wants to notify the citizens that these activities in digital currency 
are licensed currently under the Payments System Act 2003. Currently, the 
Bank is investing a lot of resources to modify further the settlements and 
payments system, including e-form of money and to launch cybersecurity 
guidelines to protect online financial transactions.
● In this country, more than 80 percent of landlords lack official title deeds with Ghana
Ghana’s Land of Commission and most of the land is being held via verbal 
agreements. In order to solve this issue, start-up Bitland of Ghana is making 
use of blockchain technology to mirror official title deeds, elevating the 
integrity of the land records that are held by the Land Commission of Ghana.
 Kenya
● Digital currencies remain booming in Kenya. The law of Kenya does not have 
a regulatory   framework for a blockchain. However, the National Land 
Commission of Kenya has welcomed the idea of blockchain network usage in 
creating transparency of land ownership, since it will boost fraudulent sales of 
land and blur over the title to land.
● After the governor of Central Bank of Kenya compared bitcoin to a pyramid 
scheme in 2017, there are some proofs that the bank may be wishing to 
soften its position going forward. In 2018, President of Kenya, Uhuru Kenyatta Kenya
had directed that AI taskforce and Blockchain can be created to discover the 
utilization of these technologies with the existing economic framework of 
Kenya. Furthermore, the Capital Market Authority, and Central Bank of Kenya, 
Societies Regulatory Authority and Insurance Regulatory Authority are due for 
a meeting to discuss who they can regulate virtual currencies.
● Another initiative was taken in the private sector of Kenya – it launched TMT 
Global Coin, a logistics company powered by blockchain that believes in 
improving cargo logistics globally by utilizing blockchain technology via smart 
contracts to enhance the authenticity and transparency of records in exports 
and imports.
 Nigeria
● Nigeria is counted amongst the largest economies of Africa. Many times, 
Nigeria has warned the citizens, as well as the local banks, regarded doing 
business with Crypto exchanges. Nonetheless, with the economy embracing 
stability over the past couple of months in 2018, the head of Bank, Musa 
Jimoh, revealed has started looking into these virtual currencies from a policy 
point of view.
● Despite such warnings, a Ponzi scheme related to Bitcoin resulted in around 
12 million residents of Nigeria who lost a combined $50 million in early 2017. Nigeria
● Furthermore, the Nigerian Deposit Insurance Corporation also warned the 
citizens of Nigeria – they would not be afforded protection for customers or 
insurance from the NDIC when buying and selling in cryptocurrencies since 
the Central Bank of Nigeria has not issued virtual currencies. In addition to 
this, NDIC also stated that none of the central banks will accept digital 
currency as an alternative for its national currency when it is not capable of 
controlling it.
● Despite the above responses by The Central Bank of Nigeria and the NDIC, 
Nigeria keeps the world’s  third-largest  holdings for Bitcoin as the percentage 
of gross domestic product.
 Mauritius
● Mauritius issued an open call to trendsetters to take benefit of its new 
Regulatory Sandbox License in May 2017. But it was required that applicants 
should ensure their project is innovative, advantageous to the economy of 
Mauritius, and cannot be accommodated in the home jurisdiction of 
trendsetter due to regulatory or legal gaps. The government of Mauritius is 
specifically looking for some impressive fintech startups and strives to be 
recognized as Ethereum Island.
● In February 2018, the Innovation-Driven Financial Services Regulatory Mauritius
Committee and the Fintech met to make recommendations to Mauritius’ 
government on the requirement to launch new sets of regulations for 
innovation and fintech.
● However, there has been no such lawsuit or court action reported in Mauritius 
yet.
 Cryptocurrency Taxation Outlook
● A draft, named TLAB (Taxation Laws Amendment Bill) has been issued and 
suggests several amendments to the Income Tax Act (1962) and the VAT Act 
89 (1991), which looks for clarifying the current provisions that are dealing 
with crypto assets in the South African tax regulation.
● Under the Value Added Tax Act 89 of 1991, it is suggested to amend section 
2 to be added in the definition of financial services, the collection, acquisition, 
issue, trading, or transfer of ownership of any digital or crypto asset. 
Consequently, if the suggestion concerning the Value Added Tax Act is 
accepted, all dealings related to crypto-assets will be supposed to be exempt 
from VAT in terms of the VAT Act’s section 12.
● Under the Income Tax Act 58 of 1962, it is suggested that crypto-assets be 
added in the description of the Financial Instrument. Nonetheless, it is also 
suggested to amend the Income Tax Act’s section 20A, to add the acquisition 
of any crypto assets beneath the ring-fencing of accessed loss provisions. If 
this suggested is permitted, dealers of crypto assets will be able to offset the 
losses incurred from dealing in crypto assets from other trades.
 Cryptocurrency Taxation Outlook
● The attention behind these suggested amendments to the tax regulation is to 
clear out the tax treatment of crypto assets under the tax regulations. From 
the perspective of an income tax,      crypto-assets should be treated as 
financial instruments for income tax, and from the perspective of Value Added 
Tax, the collection, issue, trading, acquisition, and transfer of crypto assets 
ownership should be treated as a financial service.
Final Thoughts
● Interest in Cryptocurrency is progressively growing in Africa. According to 
some economists, it is a disruptive innovation that will blossom on Africa. 
Every country in the continent has a different approach towards regulation 
cryptocurrencies or Cryptocurrency exchanges or Bitcoin trading. If you are 
planning to establish a 
white label crypto exchange software development company or white 
label crypto exchange, you need to have a look at the Cryptocurrency 
compliance that this continent has to offer. Furthermore, the taxation outlook 
for Cryptocurrency is also very important to be understood especially if you 
are planning to get white label bitcoin exchange software.
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