Exchange Control Regulations were promulgated in 1961 under section 9 of the Currency and Exchange Act, 1933 at a time when cryptocurrency existed only in the realm of science fiction. The main goal of the Regulations was to stop large amounts of money from leaving the country, especially during times of political or economic uncertainty. They are also used as a mechanism for controlling the flow of foreign currency, enabling the South African Reserve Bank (SARB) to reduce exchange rate volatility and protect the value of the Rand.
South African owners of cryptocurrency have been grappling with their obligations under the Regulations since cryptocurrency emerged as a new asset class. Regulation 3(1)(c) and 10(1)(c) are the provisions that potentially apply to cryptocurrency.
Regulation 3(1)(c), which deals with the restriction on the export of currency, gold, securities, etc., and the import of South African banknotes states that, “… no person shall, without permission granted by the Treasury or a person authorized by the Treasury and in accordance with such conditions as the Treasury or such authorized person may impose: make any payment to, or in favour, or on behalf of a person resident outside the Republic, or place any sum to the credit of such person.”
Regulation 10(1)(c), which deals with the restriction on export of capital states that, “No person shall, except with permission granted by the Treasury and in accordance with such conditions as the Treasury may impose: enter into any transaction whereby capital or any right to capital is directly or indirectly exported from the Republic.”
In a recent judgment, Standard Bank of SA v The South African Reserve Bank 047643/2023) [2025] ZAGPPHC 481 (15 May 2025), the High Court had to contend with the question of whether the current Exchange Control Regulations are fit for purpose when dealing with cryptocurrency.
Cryptocurrency is a digital currency that was introduced into the global market in 2009. The court explained that “a Blockchain is a decentralised ledger of all transactions across a peer-to-peer network and using this technology participants can confirm transactions without a need for a central clearing authority. In short, a Blockchain is the technology that enables the existence of cryptocurrency and due to its inherent nature (the algorithm, cryptography, and distributed nature), it is regarded as not being open to manipulation.”
The Court pointed out that cryptocurrency is not considered legal tender in many countries including South Africa. Cryptocurrency, it said, is not money. If cryptocurrency were money, then crypto wallets would be attached under Regulation 22B. Given that Regulation 3(1)(c) applies to the export of currency (and cryptocurrency is not a currency), it follows that the Regulation does not apply to cryptocurrency.
If cryptocurrency is not money, what is it? According to the court it is an asset that is bought and sold. Cryptocurrencies “are nothing more than codes on a digital ledger. Thus, they exist anywhere and everywhere and have a global nature.”
The court held that cryptocurrency fell outside the ambit of Regulation 10(1)(c) as it does not fall within the definition of capital. That being the case, the Regulations in their current form do not apply to cryptocurrency. The court concluded that the current regulatory framework would have to change to address the anomaly. Cryptocurrency has been in existence for over 15 years and a change to the Regulations is long overdue to address the regulatory lacuna in the law. It remains to be seen whether SARB takes the judgment on appeal, but a more pragmatic approach would be to amend the Regulations.
Tel: +27 31 570 5496, Email graeme.palmer@gb.co.za