The Draft Capital Flow Management Regulations do more than bring crypto assets into exchange control: they propose how crypto assets would be classified, how certain transactions would be conducted, and what declaration, enforcement, and penalty mechanisms would apply.
As Moonstone previously reported, the draft proposes incorporating crypto assets into the exchange control system. Commentaries from ENS and Bowmans provide further detail on how the proposed regime is structured and on interpretive and operational questions raised by the threshold model, reporting duties, and the role of authorised intermediaries.
Bowmans places the draft within a broader policy shift. The firm notes that the regulations are intended to repeal and replace the current Exchange Control Regulations of 1961 and to align South Africa’s framework with international standards, including those of the Organisation for Economic Co-operation and Development and the Financial Action Task Force. It adds that the draft seeks to “bring crypto-assets within the ambit of the exchange control framework in order to address risks and ensure oversight of emerging financial instruments”.
Werksmans takes a more critical view of whether the draft delivers the “positive bias” shift described in official communications. And stakeholders in the crypto sector have raised material concerns about how aspects of the draft may affect crypto asset service providers (CASPs) and the public.
Classification of crypto assets
At the foundation of the draft is how crypto assets are defined and categorised.
ENS highlights that the regulations distinguish crypto assets from both “currency” and “foreign currency”, while including them within the definition of “capital”.
This classification determines how the framework applies. ENS notes that crypto assets are therefore treated not as money for exchange-control purposes, but as a form of capital subject to rules governing the movement of value.
Bowmans reinforces this in broader terms, noting that the definition of capital is expanded to include “anything with a monetary value, or which can be converted to money or disposed of for monetary consideration, including crypto assets”.
Authorised crypto asset service providers
Building on that classification, the draft sets out how certain crypto transactions would be conducted.
ENS explains that the regulations introduce authorised crypto asset service providers (ACASPs) – CASPs, as defined under the Financial Intelligence Centre Act, that require authorisation from National Treasury to facilitate certain transactions within the exchange control framework.
The firm notes that Draft Regulation 3 introduces a threshold-based restriction, under which transactions involving crypto assets above a determined threshold may be conducted only through an ACASP or with permission.
ENS adds that persons wishing to undertake such transactions would need to apply to an ACASP and provide supporting documentation.
It also highlights an interpretive point: “the current wording of Draft Regulation 3 does not limit its application to cross-border transactions”, raising a question about how broadly the provision may apply once finalised.
Use and disposal of crypto assets
The draft provides that crypto assets acquired by persons other than ACASPs may be used only for the purpose for which they were obtained.
It further provides that where such crypto assets are no longer required for that purpose, they must be offered for sale to an ACASP or National Treasury.
ENS highlights that the draft contemplates repurchase of such assets “in rand at the price at which they were sold, or at a price determined by the purchaser”.
These provisions address not only how crypto assets are transacted, but also how they may be used and disposed of within the exchange control framework.
Reporting, declarations, and control over crypto assets
The draft regulations introduce a set of declaration and control mechanisms that apply where crypto assets exceed prescribed thresholds.
ENS notes that Draft Regulation 8 requires a person who has obtained possession of, control over, or the right to transfer crypto assets above the threshold to declare those holdings within 30 days.
The regulation further provides that National Treasury, an authorised dealer, or an ACASP may purchase those crypto assets for market value consideration in rands.
Draft Regulation 10 introduces an additional layer of control. ENS notes that once such crypto assets have been declared, they may not be sold, transferred, or otherwise disposed of without permission, which may be subject to conditions.
These provisions operate alongside broader enforcement mechanisms. ENS highlights that the draft regulations provide for investigation, attachment, seizure, and forfeiture of crypto assets where there is non-compliance, reflecting the application of existing exchange control enforcement powers to crypto assets.
Administrative sanctions and penalties
The draft regulations introduce an expanded administrative sanctions regime alongside increased criminal penalties for non-compliance.
ENS notes that administrative sanctions would apply to authorised dealers and ACASPs under the proposed framework.
Bowmans provides detail on the types of administrative sanctions that may be imposed, including “a financial sanction, public reprimand or censure, suspension or revocation” of authorisation, as well as disqualification of directors, senior management or key personnel, restrictions on transactions and remedial orders.
In addition to administrative measures, the draft increases criminal penalties. Bowmans notes that a person found guilty of an offence may be liable to a fine not exceeding R1 million, imprisonment for a maximum of five years, or both a fine and imprisonment.
Where an offence relates to money, a crypto asset or other property, the draft further provides that a person may be liable to a fine equal to the greater of R1m or the value of the relevant asset.
Exemptions, transitional arrangements, and related provisions
ENS notes that the draft also proposes a modernised exemptions framework and transitional arrangements, including clearer definitions relating to non-resident securities and the continuation of certain permission requirements.
Bowmans similarly highlights that National Treasury or an authorised person may exempt classes of persons or categories of transactions from compliance with the regulations.
Treasury’s accompanying statement indicates that supporting manuals will be updated and that exemptions may be considered to facilitate the transition to the new system.
Interaction with existing regulation
These measures are not intended to operate in isolation.
Bowmans emphasises that the draft exchange control provisions should be read alongside existing regulatory frameworks. The firm notes that the proposed regulations would complement oversight by the Financial Sector Conduct Authority and the Financial Intelligence Centre, indicating that crypto assets would remain subject to multiple regulatory regimes.
Scope and areas for clarification
Despite the level of detail in the draft, several aspects remain open to interpretation.
ENS reiterates that certain provisions are not expressly limited to cross-border transactions and notes that the draft does not yet provide detailed guidance on how specific crypto transactions – such as transfers between local and offshore platforms – would be treated in practice.
ENS notes that operational aspects such as transaction thresholds, documentation requirements, and the role of ACASPs are not yet fully specified in the draft and will depend on how the regulations are finalised.
While the ENS and Bowmans analyses focus largely on how the draft framework is structured and how it could operate, Werksmans takes a more critical view of whether the draft delivers the policy shift described by National Treasury and the South African Reserve Bank in their media statement.
Shift to ‘positive bias’ questioned
Their statement said the amendments “signal South Africa’s readiness to modernise and adopt a ‘positive bias’ approach to managing cross-border capital flows through fewer transaction pre-approvals, a focus on reporting, the surveillance of high-impact and high-risk cross-border transactions, and the combating of illicit financial flows”.
Kyle Fyfe, a director at the law firm, describes the statement “remarkable” because “the draft regulations largely carry forward the existing exchange control structure”. He characterises the current framework as “negative bias” – all transactions involving foreign exchange, transactions with non-residents, and exports of capital are prohibited unless otherwise provided by Treasury or the SARB’s Financial Surveillance Department (FinSurv).
Many of these exemptions from the current Exchange Control Regulations are published by FinSurv in circulars and then included in the Currency and Exchanges Manual for Authorised Dealers. “It is expected that the current exemptions will have to be formalised under the new Draft Regulation 23,” he says.
Fyfe singles out Draft Regulation 30, which deals with the regularisation of non-compliance, as “a disappointment”. As is the case with the current Regulation, it requires Treasury or an authorised person to publish a notice of the types of contraventions that may be regularised. He says this means the uncertainty regarding when the SARB will accept applications for regularisation or the penalty thresholds persists.
He also highlights the treatment of crypto assets, noting that the draft does not clarify how individuals who already hold crypto – whether acquired locally or through authorised foreign allowances – will be treated. “These individuals could be subject to significant restrictions on how they buy and sell crypto assets going forward.”
Fyfe notes that many of the exemptions that currently enable transactions are not contained in the draft itself and are expected to be formalised only after the regulations are finalised. Until those exemptions are published, he says, it remains unclear whether Treasury and the SARB “are serious about modernising the exchange control framework and adopting a positive bias approach”.
Werksmans’ critique suggests that key implementation questions may be central issues for stakeholders to address during the consultation process.
Industry responses
South Africa’s two largest licensed crypto exchanges, VALR and Luno, crypto payments enabler MoneyBadger, and a Bitcoin-focused advocacy campaign hosted on BitcoinZAR, have each published concerns about how they interpret the draft regulations and how they believe these could affect crypto use in practice.
A shared set of concerns runs through all three responses. They point to the draft’s reliance on a transaction/holding threshold that is not yet specified, and argue this uncertainty makes it difficult to assess how widely the rules would bite in day-to-day use.
Each also highlights the 30-day declaration requirement for qualifying holdings or entitlements, including disclosure of acquisition details and where assets are held. Another area of common concern is the draft’s expanded enforcement posture, including border or travel-related checks and the possibility of searches or seizures where officials suspect non-compliance.
On enforcement outcomes, VALR and the BitcoinZAR campaign explicitly flag that enforcement/forfeiture scenarios could trigger requirements relating to passwords, PINs, or codes needed to obtain access to crypto assets. In the same vein, both emphasise that declarations can be followed by tighter constraints on subsequent dealing – framing this as a practical restriction on user control once assets fall within the regime’s scope. In this context, MoneyBadger notes that provisions allowing for conversion of crypto into rand in certain circumstances could affect how and when users retain control over their assets.
Luno and the BitcoinZAR campaign suggest the draft could operate more widely than a narrow “high-impact cross-border” framing would imply, and they characterise the architecture as permission-based in a way that could shape routine usage, depending on the thresholds and how authorisation is implemented.
From a merchant perspective, MoneyBadger similarly argues that the draft could extend beyond cross-border flows to affect domestic transactions, including peer-to-peer transfers and retail payments.
VALR says the draft would require a stated purpose for certain crypto transactions and warns that use outside that purpose could trigger a mandatory sale. It frames its message primarily as customer-facing guidance on what users might have to do in practice.
Luno argues that the permission requirement it highlights could apply even to transactions within South Africa, and it proposes that crypto held on a licensed local provider should be treated as an “onshore asset” to avoid what it describes as unnecessary constraints linked to offshore investment limits.
BitcoinZAR argues that peer-to-peer transactions above thresholds could be restricted and that merchant acceptance or informal transfers between individuals may need to be routed through authorised intermediaries. The group has also raised constitutional concerns relating to property rights, administrative justice, and freedom of trade.
MoneyBadger raises a related concern that everyday uses of crypto, including informal transfers and merchant payments, could be unintentionally captured if the framework is not more clearly aligned with its stated cross-border, risk-based focus.
Consultation process
National Treasury has invited written comments on the draft regulations, with submissions due by 18 May 2026. Comments must be submitted to commentdraftlegislation@treasury.gov.za.
Both ENS and Bowmans indicate that the consultation process will be important in determining how the framework is implemented in practice, particularly in relation to thresholds, permissions, and operational detail.
