VALR sends warning about proposed new rules for crypto in South Africa
VALR co-founder and CEO Farzam Ehsani has warned that South Africa’s draft Capital Flow Management Regulations contain major risks for crypto users and service providers.
National Treasury and the South African Reserve Bank published the proposed regulations for public comment on 17 April 2026, with comments due by 18 May 2026.
The regulations are intended to replace the Exchange Control Regulations of 1961 and bring crypto assets into South Africa’s capital flow management framework.
Treasury said the draft rules would modernise exchange controls through fewer pre-approvals, more reporting, and surveillance of high-impact and high-risk cross-border transactions.
However, in truth, the proposed regulations contained provisions that would allow Treasury to expropriate crypto assets from investors.
The regulations would allow government to restrict how much crypto people are allowed to own, and force them to liquidate assets into Rands when they exceed the as-yet-unspecified threshold.
Ehsani said the draft did not reflect the constructive discussions the crypto industry had held with the Intergovernmental Fintech Working Group over the past decade.
“In many respects, it is an alarming document to read,” Ehsani said.
“It grants National Treasury and enforcement officers widespread powers to search and seize any currency, crypto assets, gold or securities determined to be in contravention of the regulations.”
Presumably, this would include searching people’s phones for crypto-related apps at all airports and points of exit from the country.
“For all crypto asset purchases, the draft mandates that every person must make a declaration in writing stating when and how the crypto asset was acquired and where it is held,” Ehsani said.
“Contravening these regulations could result in a R1 million fine and five years’ imprisonment.”
Ehsani said that South Africans need to ask why, as a society, we would criminalise using our own assets as we please in otherwise legal activities.
“The Exchange Control Regulations of 1961 are rules from the apartheid era,” he said.
“Since then, the US, the UK, France, Spain, Finland, Taiwan, Singapore and many more countries have abolished their exchange controls and prospered.”
Affront to Mandela’s legacy
Ehsani said that thirty years ago, the late former President Nelson Mandela’s ambition was to abolish exchange controls.
However, instead of scrapping exchange controls, National Treasury and the Reserve Bank appeared to be introducing even stricter regulations under a different name.
“Madiba explicitly envisioned a South Africa without exchange control regulations,” Ehsani stated, citing Mandela’s 1996 State of the Nation Address.
“In order to improve the investment climate, our monetary authorities are reviewing, on an on-going basis, the timing and pace of lifting existing exchange controls,” Mandela declared.
“For us, it is not a matter of whether, but of when, these controls will be phased out.”
Former Reserve Bank Governor, the late Tito Mboweni, said in 2005, “For all intents and purposes, exchange controls have become purposeless.”
Even Gerhard de Kock, who was Reserve Bank Governor late in the Apartheid era, said exchange controls “keep more money out than in” and only work when you don’t need them to.
“Why do we insist on preserving these destructive policies at the cost of our economic growth, prosperity and progress?” Ehsani said.
“If National Treasury insists on preserving these regulations, then there needs to be much more clarity and a level playing field that is agnostic to technology.”
Clear is mud
Ehsani explained that one of the most significant aspects of the regulations, the “determined threshold” for how much crypto people are allowed to hold, is wholly absent from the draft.
“That makes it impossible to determine the regulations’ implications and impact,” he said.
There are also provisions where the roles of “authorised dealers” and “authorised crypto asset service providers” align, but others where they do not.
“If all crypto assets are considered foreign assets, what about South African rand stablecoins or tokenised South African assets?” Ehsani asked.
“Would these South African assets be categorised as foreign assets because they exist on a blockchain?”
Ehsani said VALR will always abide by the law and that he was hopeful that National Treasury would recognise the significant work required to update the regulations.
“We must ensure these regulations are clear, consistent and fair and that they ensure South Africa will continue to benefit from the tremendous technological progress being made in the country,” he said.
“VALR will be providing a comprehensive response to the draft regulations. I urge everyone to read the draft regulations and submit their comments.”
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