Stablecoin payments may be fast but SARS still wants records

Many South African freelancers who earn from overseas clients already spend a fair amount of time dealing with invoices, exchange rates, payment fees and tax records. Getting paid can sometimes feel almost as complicated as the work itself.

One option that has started appearing more often in freelance and crypto circles is the stablecoin. Put simply, a stablecoin is a type of cryptocurrency that aims to maintain a steady value, usually by being linked to the US dollar. USDC and USDT are among the names freelancers are most likely to encounter when working with overseas clients.

The attraction is easy to understand. A client in another country can send payment directly to a digital wallet, often within minutes, after which the recipient can decide when and how to convert the funds into rand.

Getting paid may be easier. Keeping records is another matter. Although cryptocurrency is not recognised as legal tender in South Africa, that does not mean it falls outside the tax net. SARS has repeatedly indicated that crypto transactions may have tax consequences depending on the circumstances involved.

What matters is not the method of payment, but why the money was received in the first place. Where payment is received for services rendered, record-keeping and tax obligations may still apply regardless of whether the funds arrived through a bank transfer, PayPal account or digital wallet.

Keeping copies of invoices, payment dates, exchange rates, conversion fees and related transactions can make life much easier if questions arise later about where money came from and how it moved between accounts. The crypto industry is also becoming more regulated. As cryptocurrency has become more mainstream, it has also attracted greater attention from regulators.

Tax is not the only consideration. Stablecoins are often seen as a less volatile form of cryptocurrency, but they are not without risk. The company behind the coin matters, and so does the security of the wallet in which it is stored. It should also not be confused with money sitting in a South African bank account. Some freelancers like the speed and convenience of stablecoins, especially when working with overseas clients. Others would rather stick with payment methods they know and trust.

Before accepting payment in a stablecoin, it is worth asking whether the value of the payment can be clearly shown on the day it was received. Is there a clear link between the payment and an invoice? Can the movement of funds be explained if necessary? Can the source of the funds be demonstrated if required?

A stablecoin may make it easier to get paid across borders, but it does not make paperwork disappear.

This article is intended as a general overview of the topic and should not be regarded as tax, legal or financial advice. Readers who are uncertain about the tax implications of cryptocurrency should consult a qualified tax practitioner or financial adviser.