<\/p>\n
Bitcoiners are outraged at proposed new exchange control regulations in South Africa that will criminalise anyone sending or receiving bitcoin (BTC) across border without permission.<\/p>\n
\u201cThese regulations put us alongside North Korea in terms of financial freedom,\u201d says one, who asked not to be named.<\/p>\n
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\u201cHere we have unelected bureaucrats making regulations, without parliament having any oversight.<\/p>\n
\u201cThe question we, as South Africans, need to be asking is why we have exchange control regulations at all.<\/p>\n
\u201cThe Currency and Exchanges Act was written in 1933, and what Treasury is proposing are sweeping regulatory changes under an act that\u2019s nearly 100 years old. It\u2019s time to get rid of this altogether.\u201d<\/p>\n
What this could lead to<\/p>\n
The regulations pave the way for expropriation without compensation, akin to seizure by the US government of private gold in 1933 at $20.67 an ounce, according to one commentator.<\/p>\n
\u201cOnce they have all your BTC on an exchange, as they plan to do, it\u2019s very easy to expropriate without compensation.\u201d<\/p>\n
The draft regulations have galvanised the bitcoin community into public activism, with a website launched to gather comments for submission to National Treasury. What has also concerned the community is the short time frame until 18 May to submit comments.<\/p>\n
The regulations effectively kill self-custody of BTC in SA, potentially criminalising those who want to opt out of the state-controlled financial system.<\/p>\n
The draft regulations follow a court ruling in May 2025 which found crypto assets are not subject to exchange controls.<\/p>\n
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Read: Sars provides clarity around crypto asset transaction reporting<\/p>\n
The South African Reserve Bank immediately appealed this ruling, and local crypto exchanges continued treating cross-border crypto transactions is if they were illegal \u2013 which they were not.<\/p>\n
These new regulations are intended to plug that legal lacuna.<\/p>\n
What to expect<\/p>\n
Among the proposed changes:<\/p>\n
Exchanges control regulations are replaced with a new capital flow management framework intended to move away from preapprovals for foreign transactions to a risk-based model focused on reporting and surveillance of high impact and high risk cross-border transactions, and the combatting of illicit financial flows.
\nCrypto as capital: The definitions specifically include crypto assets or any intellectual property with monetary value which can be converted to money (but not immovable except property). This supposedly ends the debate as to whether BTC is currency or capital.
\nCrypto asset regulation: A new concept called \u201cauthorised crypto asset service providers\u201d is introduced. These are licensed under the Financial Intelligence Centre Act, authorised by National Treasury, to facilitate import and export of capital, directly or indirectly using crypto assets.
\nIncreased penalties: Anyone violating the regulations is liable to a fine of R1 million, imprisonment of five years, or both. Penalties can go higher where the offence relates to money, crypto assets or property.
\nDeclaration of foreign assets: Anyone in SA must declare foreign and crypto assets within 30 days of obtaining control or possession, or even if they become entitled to sell or transfer these assets.
\nRestrictions on non-resident securities: As this primer from ENS makes clear, the draft regulations propose clearer definitions of \u201ccontrolled security\u201d and \u201cnon-resident\u201d. Specific permissions from National Treasury or an authorised person would remain required for activities such as acting as nominee for non-residents or making entries in securities registers involving non-residents.<\/p>\n
Objections<\/p>\n
Members of the bitcoin community have already taken a cleaver to the proposed regulations, pointing to a potential legal confrontation if the regulations pass in their current form.<\/p>\n
There is nothing stopping a border agent detaining a South African on suspicion of holding a BTC seed phrase in their head and demanding it be handed over.<\/p>\n
The regulations are far too inclusive, says macro strategist Shiven Moodley: \u201cIt treats payment stablecoins, governance tokens, tokenised securities, tokenised debt, tokenised fund interests, utility tokens, and crypto collateral as though they are one regulatory object merely because they use distributed ledger technology. The definition is built around form, not function.\u201d<\/p>\n
This broad brush approach to regulation creates legal uncertainty and may accidentally misclassify instruments that should be regarded as \u201csecurities\u201d, or other recognised property rights, adds Moodley.<\/p>\n
\u201cThis matters because the same instrument can have more than one legal character. A tokenised share is not merely a \u2018crypto asset\u2019. It is also evidence of rights in an issuer.\u201d<\/p>\n
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Anti-constitutional?<\/p>\n
As the regulations stand, some believe they violate constitutional protections of property \u2013 crypto assets being considered property in terms of Section 25(1) of the Constitution.<\/p>\n
The proposed rules also potentially infringe free speech, since computer code \u2013 such as the code on which bitcoin operates \u2013 is widely deemed speech by the courts.<\/p>\n
The regulations could also face legal trouble in that other, less restrictive means exist to achieve their objectives, which are not stated in the regulations.<\/p>\n
This is one of the biggest regulatory changes in the SA financial space in decades,\u201d says Carel van Wyk, CEO of Money Badger, a fintech enabling bitcoin payments through retail stores such as Pick n Pay.<\/p>\n
\u201cHence the importance of approaching this with due consideration for the impact it will have. It needs very wide public participation.\u201d<\/p>\n
Ricki Allardice, CEO of Orange Global Services, believes the regulations could hurt the unbanked.<\/p>\n
\u201cAbout 11 million South African adults remain unbanked,\u201d he says. \u201cFor these citizens, self-custodied crypto assets are a primary mechanism for savings, remittances, and participation in the global economy.<\/p>\n
\u201cMandatory Crypto Asset Service Provider (Casp) intermediation \u2013 with associated fees, KYC requirements, and custodial counterparty risk \u2013\u00a0directly excludes this population.<\/p>\n
\u201cThis outcome is inconsistent with National Treasury\u2019s own financial inclusion mandate and South Africa\u2019s Sustainable Development Goals commitments.\u201d<\/p>\n
Impact on exchanges<\/p>\n
Frank Leonette, CEO of crypto exchange AfriDax, says the regulations have provoked extreme feelings in SA.<\/p>\n
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\u201cThe crypto community is reacting strongly, with many feeling the regulations are extreme, and the overall response has been one of widespread concern.<\/p>\n
\u201cPrivate crypto holders may be forced to use regulated Casps against their will, reducing privacy in the process. There are also concerns around restrictions on self-hosted wallets, where users could require permission to move their own funds, an issue many find particularly worrying.<\/p>\n
\u201cWhen the government makes the formal financial system too restrictive, people don\u2019t stop transacting, they simply move elsewhere,\u201d he adds.<\/p>\n
\u201cThis is how grey markets emerge and regulators lose sight of these transactions.\u201d<\/p>\n
The proposed rules could hurt exchange volumes, while positioning Casps as gatekeepers. That could mean higher fees for exchange users to compensate for the added costs of compliance.<\/p>\n
Overall, the impact is severe and is likely to affect volumes on exchanges.<\/p>\n
While the regulations position Casps as gatekeepers, they will need to redefine their service offerings and fee structures to accommodate the added cost of compliance.<\/p>\n
Allardice notes that the regulations go beyond those in the EU, where hardware or software providers of non-custodial wallets are excluded from regulations, or the US Clarity Act, which allows for self-custody of digital assets.<\/p>\n
As one comment in reaction to the regulations puts it: \u201cThe draft regulations, as currently framed, impose disproportionate restrictions on constitutionally protected property rights, undermine financial inclusion, and place South Africa out of step with international best practice.<\/p>\n
\u201cWe urge National Treasury to adopt a targeted, proportionate framework that addresses legitimate financial crime concerns while preserving South Africans\u2019 right to hold and transact with their own assets.\u201d<\/p>\n
#Bitcoiners #outraged #SAs #biggest #exchange #control #revamp #decades<\/p>\n","protected":false},"excerpt":{"rendered":"
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