SA tech business closes equity deal using Bitcoin
At a time when financial experts around the world are debating the legitimacy and long-term value of cryptocurrencies, a Cape Town-based technology business has opted to put its digital money where its mouth is, conducting an equity deal entirely in Bitcoin.
Nona Creative, a digital consultancy and product development firm, recently bought out a significant shareholder in what may be the first ever Bitcoin equity transaction in the country.
Motivating the unconventional deal was Nona Creative CEO, Mike Scott, who has been researching blockchain technology and investing in cryptocurrencies since 2012.
“We firmly believe in Bitcoin and wanted to show just how effortless it is to conduct normal business transactions using cryptocurrency,” Scott explains, suggesting that blockchain is “the next major technological evolution”.
Scott is not alone in his enthusiasm. With Nona Creative - as an organisation - advocating for the widespread adoption of cryptocurrency (and including blockchain consulting and development as part of its service offering), it was unsurprising that its board of directors were largely supportive of the approach taken in this deal - despite little evidence that anyone else had ever attempted it.
Taking into account that cryptocurrency is still an unregulated currency, Nona Creative called on law firm, SchoemanLaw Inc, for guidance in terms of the compliance and legalities of the transaction.
Attorney and SchoemanLaw Inc Managing Director, Nicolene Schoeman-Louw, explains that - in South Africa - the Reserve Bank is conducting a regulatory experiment. “It is no longer a question of whether such currencies, including Bitcoin, should be regulated or not, but rather who will be doing the regulating,” she says.
Until this regulatory framework has been determined, Schoeman-Louw stresses that those interested in conducting business transactions using such currencies should first seek professional advice on the taxable responsibilities, implications, and obligations.
Nona Creative also consulted Afzal Khan, the Tax Partner at RAFT - an association of African National Accountants, Auditors and other specialists - for insights into the tax considerations associated with the transaction.
According to Khan, “Cryptocurrencies are the future.”
“Current tax principles may be incorrectly applied where tax advisors do not adequately understand the underlying factual transaction flows for crypto. The principles for taxation of ecommerce transactions and financial instruments are clear. However, specific rules may be developed in future to clarify the duality of crypto financial instruments,” he explains.
Scott adds that 2017 has been the most successful year for blockchain and cryptocurrency to-date.
He says, “Since January, the value of the world’s largest digital currency, Bitcoin, has increased by a staggering 900%, with its market cap increasing by over 1000%.”
While many have described the cryptocurrency trend as a “bubble”, Scott and the team at Nona Creative choose to focus on the underlying blockchain technology which is unlimited in terms of real business uses.
“We understand that cryptocurrency is still in its early stages and, in some cases, is still a solution looking for a problem. However, we believe that this is where things are going and we are ready to lead in this space,” he concludes.