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Since the publication of “Bitcoin: A Peer-to-Peer Electronic Cash System” in 2008, cryptocurrencies have revolutionized our concept of money. Today, you can use bitcoins to pay for goods and services all over the world.
Bitcoin, the original cryptocurrency and the current standard for them, has driven the market. Many experts considered it the best cryptocurrency to trade due to its greater liquidity.
Once you have decided to buy and sell bitcoins, you need a unique bitcoin address or crypto wallet where you can store your bitcoins. A bitcoin wallet address works much like an email address and can be used to pay for goods and services and to receive payments and gifts.
Software keeps your wallet on your computer, tablet or mobile device and/or a web-based wallet may be used. Nevertheless, you may wish to avoid keeping your bitcoins at an exchange, since they can be vulnerable to hacking.
Overview: Buying Bitcoin in South Africa
Various countries in Africa have started to develop a market in cryptocurrencies and blockchain technology. Furthermore, the major regional economic hub of South Africa presently leads the rest of the continent in cryptocurrency adoption and blockchain development.
In addition to being a medium of exchange, bitcoins have become an alternative vehicle for trading and investing in South Africa. While buying bitcoin in South Africa is relatively easy, finding a suitable broker or exchange to buy through can present more of a challenge.
Not every broker will take on South African clients, but the award-winning full-service forex, ETF and cryptocurrency broker XTB currently accept clients from the country.
With respect to taxation, the South African Revenue Services (SARS) does not define the word “currency” in the Income Tax Act. This basically means that cryptocurrencies themselves are not subject to taxation.
The SARS states, “Cryptocurrencies are neither official South African tender nor widely used and accepted in South Africa as a medium of payment or exchange. As such, cryptocurrencies are not regarded by SARS as a currency for income tax purposes or Capital Gains Tax. Instead, cryptocurrencies are regarded by SARS as assets of an intangible nature.”
Nevertheless, the value of any given amount of cryptocurrency can be determined in South African Rand (ZAR) given the exchange rate. This means that any profits or income from cryptocurrency trading can be subject to taxation under the law of gross income. Basically, any South African dealing in cryptocurrencies could be liable to pay taxes on income derived from trading them.
Despite the erroneous perception of the complexity involved in trading cryptocurrencies, the process can be very simple for anyone with a bank account. The rest of the article will give step-by-step instructions on how to go about buying bitcoins in South Africa.
Step 1: Open an Account at a Cryptocurrency Exchange
Before diving into Bitcoin trading, you should be fully aware of the risks and have some knowledge on how to trade cryptocurrency. To begin, you will need to have a bank account with money to be able to upload or deposit money to an exchange, although some exchanges accept PayPal, credit cards and electronic funds transfer (EFT) payments.
Next, you must open an account at a cryptocurrency exchange that accepts users from South Africa to start buying and selling bitcoin. South Africans generally use two crypto-exchanges for trading: iceCUBED (ice3X) and Luno.
Both exchanges accept deposits from bank accounts that, once cleared, allow you to trade bitcoins. Exchanges represent the safest and most secure way of purchasing bitcoins for people just starting out.
IceCUBED allows its clients to purchase and trade in bitcoin, as well as many other alternative cryptocurrencies known as altcoins. Other cryptos available to trade include: Litecoin, Etherium, Dogecoin, Bitcoin Cash, Ada, Dash, Neo and Montero. IceCUBED also offers a mobile trading app for iOS and Android devices, and its desktop trading platform is pictured below.
The Luno exchange currently only offers trading in Ethereum and bitcoin, and includes an app for mobile trading. Once you have opened and used your account with an exchange, you can withdraw your bitcoin from the exchange into your personal bitcoin wallet. Pictured below is Luno’s bitcoin trading interface.
In addition to using the two local exchanges, South Africans can acquire and trade bitcoins through the following:
- LocalBitcoins.com: This website specializes in networking local people that are looking to buy and sell bitcoins. The site allows you to advertise whether you want to buy or sell bitcoins and lets you trade using the localbitcoins.com website. Trading generally takes place with bank transfers and escrow accounts, but you can make arrangements to meet with other bitcoin traders in person and trade for cash.
- Credit or debit card purchases: If you plan to use your credit or debit card to purchase bitcoins, you can visit CEX.IO. Once you register and enter your credit card into the system, you can deposit funds and ultimately buy bitcoins. The transactions for bitcoin must be in EUR or USD on the CEX.IO exchange, which charges a 3.5% credit card fee plus a $0.25 fee for deposits.
- Buy and sell bitcoins at a Bitcoin ATM: The first bitcoin vending machine appeared in Sandton City, North Johannesburg. The BTM can be used to purchase and sell bitcoin for cash during regular business hours. Nevertheless, in order to use the bitcoin vending machine, you must have a bitcoin wallet installed on your smartphone, which has the QR code that can be read by the BTM and used to deposit or withdraw the bitcoins you have traded. The BTM also buys and sells Bitcoin Cash, Ether, Dash, Litecoin, Zcash, Monero and Dogecoin.
Step 2: Get a Bitcoin Wallet
If you want to retain full control over your bitcoins, you must withdraw them from the exchange or other source where they were acquired to a personal bitcoin wallet. Basically, a bitcoin wallet consists of software that allows you to communicate with the bitcoin network.
The wallet software gives you the capability of notifying the network when you want to send and receive transactions. It can be installed on a desktop, tablet or smartphone. Alternately, you can use a web-based wallet that does not require a download. For highly secure bitcoin storage, a hardware wallet can be purchased, which consists of a peripheral device you connect to a network.
Every wallet account consists of two elements: your public address, which is like an email address used to receive bitcoin, and your private key, which would be the equivalent of your password in an email account. Your private key allows you to make payments and purchases with your bitcoin and, much like your email password, it must be kept secret.
If a person obtains the private key to your bitcoin wallet, he or she can empty your account. The only way to get your bitcoins back once the transaction is made is if the person with your private key decides to return them voluntarily.
In South Africa, the following wallet types can be downloaded:
- Desktop wallets: These wallets include Armory, Atomic Wallet and Bitcoin Core Wallet and require you to install them on your desktop. Ultimately, you have the responsibility of protecting your assets and doing backups. Your desktop should be secure and protected by anti-virus software.
- Mobile wallets: This type of wallet lets you take your bitcoins in your pocket and includes Bitcoin Wallet, Conoimi Wallet and Green Address. If merchants accept bitcoins, you can pay in brick and mortar stores by scanning a QR code or by using an NFC tap to pay option.
- Web-based wallets: You can access these wallets from anywhere with an internet connection, and they include BitGo and Blockchain.info. You have to be especially careful not to lose your password with this type of wallet. The wallets do not keep your private keys, so even if they are hacked, your bitcoins remain safe.
Step 3: Get Paid in Bitcoin
Once you have begun operating in bitcoins, you may want to accept them as payment on your website or at your place of business. For online purchases, you can use a checkout system such as BitPay, which facilitates payment for buyers with bitcoins.
In addition, you can download the blockchain.info merchant application, an app that keeps your wallet on your Android phone or tablet. This app allows you to accept payment in any amount of ZAR in bitcoin using the latest exchange rate. Payfast.co.za, another South African gateway provider, gives users the ability to pay in bitcoin by converting it to ZAR.
Buying bitcoins in South Africa can be as easy as using your credit or debit card at an ATM, thanks to the BTM in Johannesburg. By following the steps outlined above, you can start trading bitcoin in just a few hours once approved by an exchange or bitcoin broker like XTB.
The two local South African cryptocurrency exchanges, Luno and iceCUBED, could service most if not all of your bitcoin and cryptocurrency needs. You can also easily trade bitcoins using credit cards, the Johannesburg BTM or through a cryptocurrency broker.