Bitcoin is a digital, decentralized Cryptocurrency and all transactions are recorded in a unique ledger known as a blockchain. It is a tradeable asset that can be exchanged for other market instruments and some e-commerce and retail stores also accept Bitcoin as a form of payment. This article explains How to buy Bitcoin legally in South Africa.
The popularity of Bitcoin has increased since its creation in 2008, and research suggests that there are currently over 50 million cryptocurrency traders in the world.
Despite the lack of regulatory frameworks, Bitcoin uses blockchain technology, which gives it some degree of credibility and transparency.
What makes this asset unique is that only a certain amount of Bitcoin is allowed to be mined every year and once 21 million Bitcoin has been mined, no new coin will be minted, but this will most likely only happen in the year 2140.
If you are wondering How to Buy Bitcoin Legally in South Africa, this article will explain some of the key factors of being a Bitcoin trader.
Why was Bitcoin Created?
Despite criticism and prejudice, Bitcoin was invented in response to the Great Financial Crisis in 2008 when the financial industry was deregulated and banks were allowed to participate in Hedge funding.
This means that banks were allowed to invest client’s money in other markets and it caused a substantial increase in mortgage rates, with a massive decline in global income levels and economic activity and growth around the world.
It is clear that some countries still have not recovered from this, and Bitcoin was created as an independent method of payment that can be transferred between individuals without any banking fees or interference from banks and third parties, and as an alternative to fiat currencies.
Is Bitcoin Legal in South Africa?
Bitcoin is not regulated by any legal bodies because it was not designed to be controlled by any specific person or entity, and the blockchain cannot be manipulated by anyone and is distributed to all traders for added transparency.
This form of currency has not officially been declared illegal, but some jurisdictions are trying to implement laws to control cyberbanking.
In South Africa, the South African Reserve Bank (SARB) and SARS have warned people about the risks of Bitcoin trading and have subjected any Bitcoin profits to taxation.
Bitcoin is taxed because it is classified as property, despite the fact that it is not regarded as a legal tender or confined to the laws of the Financial Markets Act no. 19, 2012, and Bitcoin payments are not guaranteed to be recognised as a form of payment to retail entities under South African law.
Regulations Governing Bitcoin in South Africa
Currently, there are no formal regulations governing Bitcoin, but SARB is in the process of drafting strict law to regulate virtual currencies, based on tax regulations, and Anti-Money Laundering and KYC compliance.
It appears that regulating virtual currencies will take some time because this form of asset does not fit into existing legal frameworks.
However, the US, Japan and the UK have officially recognised Bitcoin as a form of payment in the retail industry and Bitcoin has been legalized and regulated to some extent.
Bitcoin in South Africa
South Africa has a very unstable and unpredictable economy, so investors seek alternative investment opportunities. Despite the lack of regulation, Bitcoin can easily be transacted and it cannot be controlled or manipulated by authorities, which is beneficial in countries at risk of corruption.
Research suggests that the citizens of Africa and Nigeria in particular, have the highest levels of consumption for Cryptocurrencies, such as Bitcoin, Litecoin and Ethereum.
Based on surveys and research conducted by Luno, about 70% of South African citizens know about digital currencies and 30% of them have invested in Cryptocurrencies, specifically in Bitcoin.
These statistics are higher than those of countries like Germany and France, indicating that there is a vast amount of people in South Africa who are either interested in or participating in Bitcoin investments.
10 Places You can Spend Bitcoin in South Africa
- The Sun Exchange (An Innovative solar-energy company that won an award for the best Bitcoin Business in Africa in 2016)
- Takealot (Popular and credible online retailer and wholesaler)
- Wikipedia (Donations can be made to Wikipedia using Bitcoin because they do not use ads to make money on the website)
- Bidorbuy.co.za (online retail store)
- Boerbier (Homecrafted beer brewing kits)
- Checkout (independent retail supermarket and grocery store in South Africa)
- Expedia (Pay for car rentals, flights and hotels with Bitcoin at Expedia Travel)
- Future Light (High-quality LED light supplier)
- House of Sacks (Eco-friendly Hessian bags)
- Tangled Cables (Samsung, iPad and iPhone accessories)
South African Bitcoin Exchanges
Two of the most popular and trusted Bitcoin exchanges used by South Africans are Luno, CEX.io and Ice3X.
Alternatively, regulated forex brokers sometimes offer Cryptocurrencies as a trading instrument and some of them have accounts specifically designed for trading digital currencies.
If you are not comfortable buying Bitcoin through apps or brokers, you can use a Bitcoin ATM or find a secure peer-to-peer Bitcoin exchange.
There are only 10 Bitcoin ATMs in South Africa currently and transaction fees are high. You can either use a Bitcoin Teller Machine (BTMS) or a Virtual Teller Machine (VTMS) to deposit or withdraw funds from your Bitcoin wallet.
Exchanging Bitcoin through a peer-to-peer (P2P) community carries greater risks because transactions are irreversible, but the use of an Escrow system ensures that funds are held securely until all requirements of transactions are fulfilled.
6 Ways to Buy Bitcoin in South Africa
Use a trusted Bitcoin exchange
There are several secure and reliable Bitcoin exchanges you can use as a South African citizen. The safest way to trade Bitcoin is by using a verified Bitcoin exchange or through a regulated Forex broker that offers Crypto as a trading instrument.
Buy Bitcoin using a debit/credit card
You can use your credit or debit card to buy Bitcoin from a trusted Bitcoin exchange, such as Luno, but additional banking fees may apply and transactions fees for Bitcoin deposits and withdrawals are high.
Use a BTM/VTM (Bitcoin ATM)
Bitcoin ATMs can be found in most major South African cities and they can be used to deposit funds into or withdraw funds from an existing Bitcoin wallet. This is a digital wallet provided by a Bitcoin exchange that sends a QR code every time you make a deposit or withdraw funds from your Bitcoin wallet.
Get paid in Bitcoin
If you own a business in South Africa, you can get paid in Bitcoin for selling products or rendering services. You would simply have to add Bitcoin as a payment method for your customers and you will need an existing Bitcoin wallet with a verified Bitcoin exchange, such as Luno, which will allow you to convert your Bitcoins into ZAR. Please note that Bitcoin is taxable in South Africa.
Join a Bitcoin trading community site
Similarly to P2P Bitcoin communities, Bitcoin can be sold privately between individuals and you can either do online transactions or exchange funds in person. This should only be done with a group of people or persons whom you trust and know because there is a huge risk of being scammed.
If you have the funding to invest in Bitcoin mining equipment, you can become a Bitcoin miner. This is not the most profitable approach to crypto trading, but you will be rewarded in Bitcoin for securing a network and verifying transactions.
How to buy Bitcoin in 5 steps
Before you create a Bitcoin wallet, you should find a trusted Bitcoin exchange such as Luno, which is a platform that can be used to buy and sell Bitcoin, deposit and withdraw funds from Bitcoin wallets, and transfer Bitcoin to bank accounts or convert bitcoin to fiat currencies.
Opening an account with Luno is easy and can be done in 5 steps:
- Sign up for an account with Luno of the official website, using your phone, laptop or desktop computer. Once your account is registered and your email is verified, you can create your user profile and redeem your promo code.
- Next, you will have to verify your account. You will be required to submit proof of identity documentation, proof of residence and bank statements. There are three account levels to choose from with Luno, depending on the amounts you deposit and withdraw.
- Once your account is verified, you can deposit money into your Luno account to buy Bitcoin and the Bitcoin you buy will be visible in your digital wallet. Your wallet can also be used to withdraw Bitcoin from your Luno account.
- Bitcoin can be bought with the “Instant buy” feature, but it will cost you more. This is the quickest way to buy Bitcoin.
- After you have decided how much Bitcoin you want to buy or how much of your fiat currency you wish to spend, you can place a “Buy order” and once it is processed, the balances in both your Luno account and your digital wallet will be updated.
How to Get a Bitcoin Promo Code
A Bitcoin promo code rewards you with free Bitcoins when you sign up and verify your account with Luno, and it works on a referral basis.
You can find your promo code by navigating to the “Rewards” section of your Luno account.
You will be rewarded with free Bitcoins if you share your unique invitation link with your friends and after they successfully sign up with Luno and register an account.
How to Get a Digital Wallet Address
Luno gives clients the option to create multiple digital wallets and each wallet will have a unique address.
The BTC address is a string of 26-35 characters and it will be the address used when you enter Bitcoin transactions with other people.
You can get your own Bitcoin wallet address in 5 easy steps:
- Sign in to your Luno account
- If you are using the desktop website, click on “Receive”. If you are using the mobile app, click on “More”.
- Choose a Cryptocurrency, which can either be Bitcoin or Ethereum.
- If you are using the desktop website, click on “Add address. If you are using the mobile app, click on the plus sign.
- Finally, click on “Create” to generate your unique digital wallet address
It is estimated that there are currently 25 million Bitcoin owners in the world and it is a recognised, tradeable asset by many individuals, businesses and brokers. This guide on How to buy Bitcoin legally in South Africa can be used as a frame of reference when trading Bitcoin as a South African citizen or business.
Despite criticism and high risks, Bitcoin has created exciting investment opportunities for people around the world and many businesses have evolved by accepting it as an alternative payment method.
There are no official laws regulating Bitcoin transactions, but the use of a public blockchain that cannot be manipulated by anyone and shows every Bitcoin transaction, adds to the transparency and appeal of Bitcoin.
As with any other tradable asset and investment, it is important to do your research and align your budget with your goals and always be on the lookout for scams!