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South African Tax Authorities Want To Track Digital Currency Trades

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blockchain technology can help Africa

In 2017, bitcoin has finally become mainstream and its global adoption is on the rise. But while bitcoin is now being recognised by most investors as a viable asset class, its quasi-legal status has led to regulators grappling with ways on how to integrate it within their current monetary structures. According to South African media outlet Moneyweb, one such regulator is the South African Revenue Service (SARS), which is currently exploring means of tracking cryptocurrency trades more efficiently.

SARS Collaborating with Other Tech Companies to Track Cryptocurrency Trades

Bitcoin’s bull run, which has seen a price surge of more than 1600 percent this year, poses a threat to SARS’ revenue collection efforts since it has to depend on cryptocurrency traders truthfully disclosing their profits. Normally, financial institutions such as banks have stringent KYC (Know-Your-Customer) processes in place to identify customers and information on clients’ investments are forwarded to the regulator for verification.

However, due to bitcoin’s pseudo-anonymity, the information on digital currency transactions is hard to come by and the regulator has to rely on taxpayers being honest about their cryptocurrency gains. To mitigate against non-disclosure of profits, the SARS is having discussions with several leading technology companies on how to track digital currency trades.

Speaking to Moneyweb, SARS Head of Research, D. Randall Carolissen, states,

“As you can imagine it is very difficult – the blockchain technology. Without revealing too much – we are talking to some of the top technology companies in the world that [are] doing similar work for Canada and the UK and we are hoping to get that technology.”

While SARS is yet to make any formal announcement, the regulator has adopted the Organisation for Economic Cooperation and Developments (OECD) recommendations, which outline how cryptocurrencies should be treated.

“We were part of the OECD working groups and that has certainly been incorporated into our policy environment. So we are on top of it. In fact, South Africa is cited as one of the leading implementers of this cryptocurrency environment,” Carolissen adds.

SARS Treating Cryptocurrency Trades as Taxable Events

Presently, the regulator is grouping digital currencies in the capital realisation category, and thus similar to trading shares. If you buy at a particular point and sell it down the road, you will be faced with capital appreciation. Subsequently, you will have to pay Capital Gains Tax.

Following this logic, SARS is partnering with the South African Reserve Bank (SARB) to critically examine and match the flow of funds in and out of the country with the actual movement of goods, so that no information is withheld from authorities.

Curiously, in a 2014 position paper, the South African Reserve bank asserted that it did not supervise or regulate the digital currency landscape and all activities related to the buying, using and trading of cryptocurrencies is at the end- users sole risk with the bank bearing no responsibility for any losses.

According to Ruaan van Eeden, the head for tax and exchange control at the Geneva Management Group, the company is receiving numerous inquiries about the exchange control and tax treatment of digital currencies. He argues that cryptocurrency profits should be dealt with singularly, dependent on the facts of each case and not be applying the same principle to each scenario.

The price volatility in the cryptocurrency markets has led to bitcoin traders making huge profits in the past few years. For the South African tax authority, the challenge is to come up with guidelines that clearly define cryptocurrencies and spell out the tax consequences of bitcoin activity.

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Nigeria Wants Regulatory Framework for Cryptocurrencies

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Nigeria Regulatory Framework Cryptocurrencies

With cryptocurrency adoption soaring in Nigeria, it is no surprise that on April 25, 2018, members of the House of Representatives, urged the Central Bank of Nigeria (CBN) and the Nigerian Deposit Insurance Commission (NDIC) to create a legal framework for the regulation of blockchain technology.

The resolve was passed following the adoption of a continuous motion titled ‘Need to regulate blockchain applications and Internet technology’, which was supported by Solomon Adaelu, who emphasised the innovation that the blockchain brings such as the potential to accelerate payments in the country’s financial services industry.

Adaelu said: “Blockchain as a digital and decentralisation ledger technology that records all transactions without the need for financial intermediary bank is new to humanity and can be a core payment facilitator for financial services industry. A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography as an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.”

The blockchain was invented in 2008 for the cryptocurrency bitcoin. Since its establishment, it has helped solve the issue of double spending on digital currency transaction without the need for a central server or trusted authority.

Adaelu went on to state that the deadline for a unified cryptocurrency regulation had been set for July 2018 following the G20 Finance Ministers’ meeting in March.

He further added: “Countries such as the USA, the UK, Russia, Venezuela, and Kenya have [already] provided [a] framework for the regulations of this emerging technology,” and believes that Nigeria should be next in line to do so.

Other lawmakers supported the motion while acknowledging the warning given by the NDIC to be careful when trading cryptocurrencies, given the complexity and uncertainty surrounding them.

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Binance Partners with Blockchain Innovation Hub in Uganda to Promote Economic Development

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Binance in Uganda
Image by Binance

Binance, a global cryptocurrency exchange, has partnered with Crypto Savannah, Made in Africa initiative, and Msingi East Africa to promote economic development and youth employment in Uganda using blockchain technology. The partnership aims to achieve these goals by “creating thousands of jobs and bringing investments to Uganda.”

Made in Africa initiative and Msingi East Africa are organisations that are dedicated to the economic transformation of African countries while Crypto Savannah is a newly created African blockchain innovation hub.

According to Trading Economics’ data, the employment rate in Uganda stood at 47.80 percent in 2012 compared to 88.30 percent in 2009. The broad use cases for blockchain technology have the potential to change these statistics for the better by providing innovation opportunities for young people.

Changpeng Zhao, CEO and founder of Binance, announced these plans on Twitter and hinted at the possibility of Binance getting more involved in African projects.

Binance’s initiative is believed to have peaked at a recent meeting with the Blockchain Association of Uganda (BAU) where Zhao interacted with the local blockchain community and promised to support and train young entrepreneurs leveraging the blockchain. He also advised young entrepreneurs to offer solutions that are going to improve the lives of the society.

“Binance is tailor-making partnerships according to the environment. We want to understand the landscape and grow our understanding of the market.”

Zhao’s meeting with BAU will be followed by the Africa Blockchain Conference 2018 which will be held in Kampala in May.

Blockchain Technology is Gaining Momentum in Africa

The Binance initiative is just one of the several upcoming blockchain-based projects that are taking place in Africa. For instance, the World Food Program recently announced a partnership with Devery to make food delivery to Tunisian school children safe. Furthermore, the World Blockchain Summit held in Nairobi last month has helped to open doors for global blockchain companies to establish themselves in Africa.

In view of the Binance initiative, Africa could attract more global blockchain companies in the future as the technology continues to take root on the continent.

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BitMari Conducts First Test Remittance on the Bitcoin Lightning Network

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BitMari Bitcoin Lightening Network

Zimbabwean startup BitMari has managed to successfully conduct its first Bitcoin Lightning Network test transaction with Tanjalo, a bitcoin startup from Lagos, Nigeria. The transaction signals a shift for remittances in Africa as users can soon expect almost instant low-cost bitcoin remittances.

Fast Transactions, Low Fees

BitMari is a Zimbabwe-based bitcoin company that leverages blockchain technology to expand into new remittance markets for the African diaspora. The startup was founded in 2015 by Sinclair Skinner and Christopher Mapondera to address the challenges faced by Zimbabweans when sending money overseas and vice-versa. In 2017, the company made history by becoming the first bitcoin enterprise to receive a money transfer license from the Reserve Bank of Zimbabwe. The company also formed a strategic partnership with Agribank to handle remittances for their customers using bitcoin.

Tim Akinbo, the co-founder and CTO of Tanjalo, was able to transfer $15 from Nigeria to a recipient in Zimbabwe through the BitMari platform using bitcoin. He believes the almost instantaneous money transfer will be instrumental in transferring value and promote cohesion by bridging local communities. The company is excited about the new development especially after successfully setting up the Lightning nodes.

Skinner, who is an ardent supporter of the adoption of bitcoin and blockchain technology in Africa to solve everyday challenges, stated:

“BitMari’s quick adoption of Lightning is active use of Bitcoin and Blockchain technology to solve real World challenges facing Africans on the continent and in the diaspora; such as costly remittance fees.”

The Bitcoin Lightning Network

The Bitcoin Lightning Network (LN) is a system built on top of bitcoin that enables people to send and receive payments instantly, and lower transaction costs by bypassing the blockchain. The Lightning Network’s use of payment channels lets users transact with each other directly without having to broadcast their business to the entire network. Currently, the Lightning Network is growing after being launched a short while ago on main-net by the Lightning Labs team.

BitHub Africa, a Nairobi-based blockchain accelerator of which BitMari is a member, has published a guide on how someone can go about setting up a Bitcoin Lightning Node on a cheap computing device called Raspberry Pi. The device can be used to process transactions by anyone with the resources and skills to host the node.

For now, BitMari is searching for other Lightning nodes to connect to their own. The company is also focusing on improving its user experience to increase adoption of its services and pass on the benefits of fast and affordable remittances to its customers.

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