Category: South Africa

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Crypto News Investing Regulation South Africa

South Africa Classifies Crypto Assets as Financial Products

Bitcoin infront of South African Flag

In a milestone decision for crypto regulation, South Africa declared on October 19 that all crypto assets are, in fact, financial products. 

This declaration from South Africa’s Financial Sector Conduct Authority (FSCA), the nation’s financial services regulator, means that all crypto assets are now governed by the Financial Advisory and Intermediary Services Act, 2002 and will be subject to the same regulation as other financial products.

The declaration was signed by South Africa’s Commissioner of the FSCA, Unathi Kamlana, and came into effect immediately.

What Now Qualifies as a Crypto Asset in SA?

The declaration includes a definition of what qualifies as a crypto asset. The definition used is quite broad, defining a crypto asset as a ‘digital representation of value’ that meets the following three criteria:

  1. It’s not issued by a central bank but it is able to be traded, transferred or stored, allowing it to be used for payment, investment or other uses;
  2. It applies cryptographic techniques; 
  3. It uses distributed ledger technology (such as blockchain).

What Does it Means for Crypto Investors in South Africa?

For the first time, cryptocurrencies will be regulated in South Africa, which stands to bring significant benefits to investors and consumers — such as improved legal protections for victims of scams and improved anti-money laundering (AML) and know your customer (KYC) compliance. 

Regulation will also lead to more clarity around the legal status of cryptocurrencies that may encourage more commercial and enterprise use cases, such as real-world asset tokenisation and partnerships between traditional financial institutions and crypto-based businesses.

Despite the benefits of regulating crypto, there are fears that increased regulation and KYC requirements may lead to marginalised people losing access to crypto services on which they rely, with some suggesting people who earn under a certain threshold should be exempt from KYC requirements.

According to Finder’s Cryptocurrency Adoption Report, released in August 2022, 4.2 million South Africans own crypto, that’s 10 percent of the population, slightly lower than the global average of 15 percent.

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Bitcoin Crypto News Crypto Wallets South Africa

Central African Republic Teases ‘Project Sango’ Creating Crypto Hub

Just a month after making Bitcoin legal tender, the Central African Republic (CAR) is teasing another crypto initiative dubbed ‘Project Sango’. It has gone as far as publishing online plans for a ‘crypto hub’ that will include a ‘crypto island’ and a digital wallet.

A May 23 post on the government’s official Facebook page referred users to a landing page at sango.org. Users were then requested to register for the waitlist and provided with a link to a 24-page online presentation with more detail regarding the planned initiative.

The president of CAR, Faustin-Archange Touadera, did not confirm the plans, but tweeted on the weekend with the hashtag #bitcoin that the next phase would be announced “very soon”:

First Government-Recognised Legal Crypto Hub

The Sango Project, according to the presentation, entails developing “the first legal crypto hub recognised by a country’s parliament”. The country’s ambitions also include establishing a Digital Nation Bank, allowing Bitcoin land sales, and constructing a crypto wallet.

Door Opened to Natural Resources

The presentation adds that the government will facilitate crypto enterprises’ access to natural resources such as gold, diamonds and uranium, as well as implement a “citizenship by investment” program with zero-rate income and company taxes.

This news is significant as the landlocked African nations rank among the least developed economies in the world, with agriculture being the largest contributor to their gross domestic product. According to figures from the World Bank, the CAR’s economic output stood at US$2.38 billion as of 2020 and the country ranks near the bottom of the United Nations’ Human Development Index.

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Crypto Art Crypto News NFTs South Africa

Hand-Drawn Nelson Mandela Paintings to Be Sold as NFTs

Bonhams in London is set to auction off a set of five paintings minted as NFTs from the hand of former South African president Nelson Mandela. The collection, entitled “My Robben Island”, consists of five watercolour paintings that depict the 18 years Mandela spent incarcerated on Robben Island, a now-inactive offshore prison near Cape Town.

‘The Motivation’ Behind Mandela’s Art

Mandela completed the five paintings after stepping down from the presidency in 1999. The collection also features a piece called “The Motivation”, a handwritten text that explains his visualisations of the harsh prison island where he served his time during the South African struggle to end Apartheid. All six of the works include Mandela’s signature.

It is true that Robben Island was once a place of darkness, but out of that darkness has come a wonderful brightness, a light so powerful that it could not be hidden behind prison walls, held back behind prison bars, or hemmed in by the surrounding sea … The most fantastic dreams can be achieved if we are prepared to endure life’s challenges.

Extract from ‘The Motivation’, by Nelson Mandela
Robben Island cell. Source: The Guardian

Makaziwe Mandela, daughter of the former president, said the watercolours, all of which were painted in 2002, represent “the triumph of the human spirit”. She added that offering the artworks as NFTs was a way to reach new audiences: “My dad was all about creating an accessible society. This is a way of democratising his art.”

Robben Island church. Source: The Guardian

NFTs to be Sold on Nifty Gateway

Giles Peppiatt, director of modern and contemporary African art at Bonhams, has said that the digital arts reach “new audiences that probably don’t go to art galleries and museums”.

These are people who live a lot of their lives through their phones, through the internet, and who have large amounts of money at their disposal – and they are collectors. They are becoming a more and more important part of the art market.

Giles Peppiatt, director of modern and contemporary African art, Bonhams

The paintings will be offered at auction on March 9 on the Nifty Gateway NFT platform, over a six-hour period at a fixed price of US$3,495 for the entire collection, or US$699 for an individual work. Hopefully, the works will fetch prices far beyond the likes of Gary Vee’s hand-drawn doodles, which sold for US$1.2 million last year. But if you’re not convinced they will, you could always short the NFTs.

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Australia Crime Crypto News Gold Scams South Africa Tokens

Australian Man Charged by SEC for Fraudulent ICO

Australian cryptocurrency entrepreneur Craig Sproule has been charged by the US Securities and Exchange Commission (SEC) for defrauding investors by diverting millions from a digital coin offering into South African gold mining interests.

Australian crypto entrepreneur Craig Sproule. Source: medium.com

Sproule, currently a resident of California, faces additional charges of making false and misleading statements when selling digital asset securities. Jointly named on the SEC charge sheet are two companies founded by the Lismore-born entrepreneur – Crowd Machine Inc and Metavine Pty Ltd.

‘The Man Behind the Machine’

Self-proclaimed on social media as “the Man behind the Machine”, Sproule has been ordered to pay a US$200,000 (A$280,000) civil penalty while Crowd Machine’s digital tokens will be banned from crypto trading platforms.

Crowd Machine was intended to replace Amazon Web Services, the cloud-based computer infrastructure, with a distributed system. To achieve this, Sproule claimed to have raised US$40.7 million through an initial coin offering of Crowd Machine Compute Tokens (CMCT) in early 2018 that was to fund a decentralised computer network.

Almost $6 Million Siphoned into South African Gold Mines

Instead, Sproule siphoned US$5.8 million into gold mining entities in South Africa, which was not disclosed to Crowd Machine token investors. None of the US$5.8 million has been recovered, and the South African gold mining operations “have returned no revenue”, according to the SEC’s statement of claim.

Along with Sproule and Crowd Machine, another entity registered in Australia, Metavine Pty Ltd, has committed to covering any future civil penalties relating to Crowd Machine. An application for voluntary deregistration of Metavine was filed with the Australian Securities and Investments Commission (ASIC) last month.

Sproule and Crowd Machine have neither admitted nor denied the allegations, although Sproule will be summarily banned from serving as an officer or director of a public company.

Shades of Last Year’s BitConnect Fiasco

The Sproule/Crowd Machine imbroglio echoes the circumstances of an SEC lawsuit filed last May against five individuals linked to BitConnect for promoting and selling unregistered securities. That case also shared a connection down under, with ASIC accusing a former BitConnect promoter of defrauding small investors in Australia in 2017-2018.

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Crypto News Nigeria South Africa Surveys

P2P Drives Africa’s Soaring Crypto Adoption, Up 1200% Since 2020

Whether one is a sceptic or proponent, this past year has undoubtedly been crypto’s breakout year. Global adoption is up some 880 percent, but it is the African continent that has seen the most dramatic increase, according to a recent blogpost by Chainalysis.

Cryptocurrency value received by Africa, July 2020 – June 2021. Source: Chainalysis
 

According to Chainalysis, the African crypto market has grown by 1,200 percent (in value received) over the past year. Estimates put these figures at approximately US$105.6 billion between July 2020 and June 2021.

Africans Use Crypto Differently

As noted by Chainalysis’ report, emerging markets tend to turn to crypto to preserve their savings in the face of currency devaluation, send and receive remittances, and carry out business transactions. By contrast, in developed markets it is driven more by institutional investment.

Despite being the smallest market by a long way, Africa enjoys some of the highest grassroots adoption in the world with Nigeria, Kenya, South Africa and Tanzania ranking within the top 20 of Chainalysis’ Global Crypto Adoption Index.

Supporting the notion of grassroots adoption, retail-sized transfers comprised 7 percent of transaction volume, compared to the global average of 5.5 percent.

Retail share of the market. Source: Chainalysis

Growing Popularity of P2P (Peer-to-Peer) Platforms

One of the important trends in the African crypto adoption story is the enormous growth in transaction volumes on P2P platforms (adjusted for purchasing power per capita and internet-using population). One of the main reasons for this is the lack of access to trusted, centralised exchanges. In other instances, central banks (such as in Nigeria) and retail banks often have made it difficult for customers to transfer funds across to centralised exchanges. The chart below illustrates growth in two of the more popular P2P exchanges:

Trading volumes for Localbitcoin and Paxful in USD. Source: UsefulTulips.org

Compared to other regions, Africa’s P2P bitcoin volume is a lot higher, particularly in developed regions. Importantly, since so much trade is done informally, the figures below are probably lower than reality:

P2P share of transaction volume, July ’20 – June ’21. Source: Chainalysis

Remittances Play a Big Role

Crypto-based remittances are also increasing in Africa. Some of that is attributed to the growth in international commercial transactions as Africans use crypto to pay for goods to import and sell at home.

Estimated remittance payments in Africa, July ’20 – June ’21. Source: Chainalysis

Wealth Preservation a Natural Consequence

In general, African countries tend to suffer from relative high levels of economic instability and currency depreciation. As the phrase goes: “bitcoin fixes this”. Africans would appear to have taken heed. Note the inverse correlation since May 2020 between P2P trading volume and currency depreciation in the Kenyan shilling. The case couldn’t be any clearer:

Kenyan shilling depreciation v P2P trading volumes. Source: Chainalysis