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South Africa
5.57 Neutral Environment
Against the backdrop of political uncertainty exacerbating economic problems, there is a huge interest from the population in bitcoin. According to Google Trends, the RSA ranks first in the world in terms of the number of search queries related to bitcoin. According to some reports, 60% of South Africans do not know about cryptocurrencies. At the same time, 38% of those who know about them, regret they have not invested in cryptocurrencies before.
The National Treasury, the South African Reserve Bank, the Financial Services Board, the South African Revenue Service, and the Financial Intelligence Centre issued a joint statement in 2014 warning the public against the risks associated with the use of virtual currencies, bitcoin in particular, for transactions or investments. That same year, the South African Reserve Bank in its position paper stated it was not engaged in virtual currencies regulation and could not be held accountable for what was happening in the area.

In 2016 the South African Reserve Bank convened a consortium of leading banks to experiment with the distributed ledger technology. That same year, the South African Reserve Bank formed working groups to study financial innovations and the possibilities of regulating the distributed ledger technology in particular.

The first steps to regulate cryptocurrencies were taken in 2018: the South African Revenue Service (SARS) announced that operations in cryptocurrencies were thereby considered within the framework of the Income Tax Act and transactions involving cryptocurrencies were subject to the general principles of the tax law.

Cryptocurrencies are now freely purchased and sold in the territory of South Africa. And yet, despite the high interest of some part of the population therein, the absence of certain regulatory framework may be said to hinder the spread of bitcoin in the country. Legal framework is now being actively developed; moreover, the South African Reserve Bank even considers a prospect of emitting its own cryptocurrency.
Rather Enabling Political Environment
7.0 points
The issues related to the blockchain technology development and cryptocurrency regulation in the Republic of South Africa are mainly at the periphery of political elites' attention. The statements of the head of state, MPs, and the government officials on this subject are general, but the Reserve Bank is the initiator of many projects aimed at the blockchain technology study and development. The Reserve Bank, the National Treasury, the Internal Revenue Service, the Financial Intelligence Centre, the Financial Services Board, and the major banks of the country often cooperate for research and regulation of new technologies.

Despite the warning about the risks associated with the distributed ledger technology and cryptocurrencies, the accents in the positions of political elites have shifted towards optimism recently. There is more and more talk about opportunities for positive changes associated with new technologies and about the need to create a regulatory framework that will help secure the development of these technologies.
Rather not Enabling Legal Environment
2.95 points
Regulatory Convergence
There is no special legislation that regulates all legal relationships associated with blockchain and cryptocurrencies in South Africa. The legal relations involving blockchain and cryptocurrency are not regulated by any single body, but the South African Reserve Bank plays the most prominent role therein, acting as an initiator of cooperation among other regulators. Due to missing regulation of the crypto-industry as such, there are no obvious contradictions in the approaches of various regulators to blockchain and cryptocurrency issues.

Definiteness of Legal Regulation
There is no special legislation that regulates all issues related to blockchain and cryptocurrencies in South Africa. Legislation by analogy is used to regulate relations involving blockchain projects and cryptocurrencies. The most detailed act in this field was a report published by the South African Revenue Service (SARS) in April 2018, which explained the application of tax legislation to relations involving cryptocurrencies.

The South African Reserve Bank (SARB) does not recognize cryptocurrency as legal tender in South Africa. –°ryptocurrencies are regarded by SARS as assets of an intangible nature. Smart contracts and ICOs are beyond the scope of legal regulation in South Africa. ICOs are not required to follow the requirements to standard documentation or due diligence with respect to a third party.

Stability of Legal Regulation
The FinTech working group led by the South African Reserve Bank is currently developing a policy on innovation. The main emphasis in regulation will be made on mitigating existing risks, with the newly elaborated legal framework creating favorable conditions for the development of innovation. Thus, there are solid grounds to suppose that the new legislation will be moderately favorable for conducting cryptocurrency-related business in South Africa.

Adequacy of Legal Regulation
The regulation of cryptocurrency in South Africa cannot be consider as adequate because the majority of issues related to cryptocurrencies are missed. The lack of legal definition of cryptocurrency, except for defining it as intangible assets for tax purposes, is of particular concern. At the same time, some issues are regulated in the way of supporting technology: mining is subject to income tax, and operations with cryptocurrencies are exempt from VAT.
Situation with the Rule of Law
South Africa has average scores in the Rule of Law Index and ranks 44th among 113 countries. The conditions of the legal regulation of blockchain and cryptocurrencies are neutral, and since the values of the sub-criterion of the rule of law are low (0.59), the amount of the difference between weighted (multiplied by Rule of Law Index score) and unweighted assessments are quite significant.
Rather Enabling Infrastructure Environment
7.37 points
South Africa ranks 68th among 193 countries in the E-Government Development Index and 82nd in Doing Business rankings. The country has the best indicators in minority investors protection.