Crypto Caution May Cost SA Millions: Why Classifying Bitcoin as ‘Onshore’ Could Boost the Fiscus

Lack of clarity on cryptocurrencies is costing South Africa more than just missed investments, it’s costing the country cold, hard tax revenue.

Imagine missing out on half a billion rand simply because of an outdated label. That’s exactly what South Africa risks as it drags its feet on properly regulating cryptocurrencies. Despite global momentum and skyrocketing returns, the South African Revenue Service (Sars) is unable to collect what could be a massive source of new tax revenue, all because crypto still isn’t formally recognised as an onshore asset.

And in a country struggling with low growth, ballooning debt, and urgent socio-economic demands, that’s money we can’t afford to leave on the table.

Crypto ETFs: An Open Goal for Tax Revenue

South African-born crypto platform Luno recently ran the numbers. If cryptocurrencies like Bitcoin were designated as onshore assets, a move that aligns with international best practice, the country could rake in at least R540 million in extra tax revenue over five years.

That estimate, mind you, was conservative. It assumed just 1% of institutional assets would go into Bitcoin-based exchange-traded funds (ETFs), modest annual returns, and existing capital gains tax rules. In reality, Bitcoin has outperformed those expectations by a country mile.

The cryptocurrency soared over 1,000% in just five years, recently breaking R2 million per coin, and over the past decade, it’s trounced the S&P 500. R1,000 invested in Bitcoin in July 2015 would be worth over R413,000 today. In contrast, the same investment in US equities would yield only R3,000.

And yet, South African institutional investors remain on the sidelines, hamstrung by regulatory vagueness.

Why the Label Matters: Onshore vs Offshore

Here’s the crux: without a clear designation as an onshore asset, crypto is caught in limbo. Asset managers can’t easily create ETFs or digital asset funds because South Africa’s exchange control limits mean offshore allocations are already maxed out by global equities and traditional currencies.

A simple fix, classifying crypto as onshore, would unlock domestic investment, encourage innovation, and create a new tax stream. It’s a win for investors, a win for regulators, and a win for the fiscus.

It’s not a stretch. ETFs already exist for currencies, metals and commodities. Bitcoin fits perfectly into this model. In fact, Bitcoin ETFs are now among the fastest-growing financial instruments globally.

Global Finance Is Moving, Fast

Look no further than the United States. In 2024, asset management giant BlackRock launched its own Bitcoin ETF and it became the fastest-growing ETF in US history, reaching over $70 billion (R1.2 trillion) in assets under management by mid-2025. It even outpaced previous records set by gold ETFs.

Meanwhile, in the UK, even pension funds are getting in on the game. A fund made headlines for allocating 3% of its portfolio to Bitcoin, a significant signal that digital assets have gone mainstream.

And South Africa? Still treating crypto like a financial stepchild.

What the Courts Are Saying

The pressure is mounting from the judiciary too. A recent Pretoria High Court ruling found that South Africa’s 1961-era exchange control regulations are no longer fit for purpose when it comes to crypto. The message was clear: after 15 years of cryptocurrency existence, it’s time our laws caught up.

There’s also a cautionary tale just north of us. Nigeria’s clampdown on crypto trading forced the market underground, creating a booming, unregulated peer-to-peer network that escaped both oversight and tax collection. A heavy-handed approach didn’t kill crypto, it just pushed it out of reach.

Political Will Is the Missing Ingredient

South Africa has a choice. Either act swiftly to create fair, clear rules that treat cryptocurrencies as the legitimate asset class they’ve become or continue to miss out on the potential billions in future tax revenue.

The stakes are high. This isn’t just about digital coins. It’s about plugging a revenue hole, building a forward-thinking investment framework, and giving South Africans more ways to grow their wealth.

Right now, the only thing standing between South Africa and a new economic opportunity is political will. The tools, the data, and the precedent all exist. It’s time for our regulators to stop playing catch-up and start playing to win.

{Source: IOL}

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