PROJECT: CRYPTO IN SOUTH AFRICA - KNOW THE LAW

isabels39
Jul 22
4 min read

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South Africa’s cryptocurrency ecosystem has matured rapidly over recent years.

The crypto space is now firmly embedded in the country’s legal and regulatory infrastructure.

From Bitcoin and Ethereum traders to crypto influencers and miners, anyone engaging with digital assets

must understand the legal framework that governs them. Failure to comply now carries financial risk,

as well as the prospect of criminal liability and imprisonment.

REGULATORY FRAMEWORK: FSCA DECLARATION AND LICENSING

On 19 October 2022, the Financial Sector Conduct Authority (FSCA) formally declared that crypto assets are classified as financial products under the FAIS Act 37 of 2002.
This shift made it mandatory for any individual or entity offering crypto-related advisory or intermediary services to obtain FSCA licensure.
During a transition period, providers had to apply for licensing between 1 June and 30 November 2023 to remain compliant.
By March 2024, around 59 licences had been granted, with approximately 355 applications under review.
As the FSCA builds capacity, tripling its budget and expanding staffing, it plans to enforce substantial fines and investigate unlicensed operators by 2025.

TAX OBLIGATIONS: SARS DECLARES CRYPTO INCOME TAXABLE

SARS considers crypto assets as financial instruments, subject to income tax or capital gains tax (CGT) depending on an individual's activity and intent.
As of October 2024, SARS disclosed that over 5.8 million South Africans hold crypto assets, raising compliance concerns.
Accordingly:
- Frequent traders are taxed under normal income tax (up to 45%) on trading profits.
- Long-term holders pay CGT (up to 18%) on gains, after a R 40,000 annual exemption.
SARS has also implemented AI, machine learning, and blockchain analytics to detect undeclared activity.
Failure to disclose crypto dealings could result in fines up to R16,000 per month, or up to five years in prison under the tax regime from 2025 onward.

PRINCIPAL RISKS FOR CRYPTO USERS:

REGULATORY CRACKDOWNS:
- Unlicensed exchanges are being shut down.
- Crypto funds held on such platforms may be frozen or seized with no recourse.
CRIMINAL LIABILITY:
- Skirting KYC protocols or using anonymous wallets to evade tax can lead to fraud charges.
- If crypto is linked to scams, money laundering, terror financing, or Ponzi schemes, users face criminal prosecution.
SCAM EPIDEMIC:
- South Africa has hosted major crypto scandals:
  - Mirror Trading International (MTI):
    - Touted an AI trading bot;
    - Eventually collapsed;
    - Over 100,000 people from 140 countries lost funds;
    - The company was declared a Ponzi scheme by the courts;
    - The CEO was ordered to repay billions.
  - Africrypt:
    - The founders absconded with more than R54 billion in crypto, leaving investors devastated.
BANKING RESTRICTIONS:
- Banks now flag crypto-related transactions.
- Accounts associated with unregulated exchanges are often closed, and users must provide proof of FSCA compliance and tax registration to maintain banking services.
CYBERSECURITY:
- Major risk sources remain - phishing attacks, key theft, and malware.
- Loss of private keys means irreversible loss of funds.

ACTIONS:

Use only FSCA-licensed platforms and verify listings on fsca.co.za.
Keep accurate records (dates, Rand values, transaction types).
Declare all crypto gains.
Keep crypto in secure wallets, with offline backups of private keys.
Avoid offers promising fixed or guaranteed returns.
Stay informed via FSCA, SARS and SARN channels.

The legal landscape surrounding cryptocurrency in South Africa has undergone a profound transformation.

As of 2025, the rules are clear: crypto assets are subject to regulation and taxation.

Excuses based on ignorance no longer hold weight. Yet for informed and compliant users,

digital assets still provide an opportunity.

The key lies in :

understanding the law,
maintaining transparent records,
prioritising security,
and submitting to the financial integrity frameworks now in place.

Compliance is no longer optional - it is the way to stay out of trouble.

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Mike Bolhuis

Specialist Investigators into

Serious Violent, Serious Economic Crimes & Serious Cybercrimes

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Mobile: +27 82 447 6116

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