Key Highlights
- At least three crypto-related deals worth a combined 2.2 billion rand ($135 million) have reportedly been put on hold.
- Proposed rules would bring crypto assets under South Africa’s existing exchange-control framework.
- The changes could affect how companies use crypto and stablecoins for cross-border transactions.
South Africa’s proposed changes to cryptocurrency exchange-control rules have reportedly put at least 2.2 billion rand ($135 million) worth of digital-asset transactions on hold, adding uncertainty for companies using crypto in cross-border business.
According to a Bloomberg report published September 21, people familiar with the matter said at least three transactions had been paused because of the proposed changes. The sources were not identified because they were not authorized to speak publicly.
The transactions reportedly include a private-equity investment, as well as deals involving capital formation for small businesses and corporate treasury management.
Proposed rules would bring crypto under exchange controls
South Africa is considering changes that would bring crypto assets within the country’s existing exchange-control framework.
The proposals would update rules under the Currency and Exchanges Act, which dates back roughly nine decades, to account for digital assets and their use in cross-border transactions.
The draft framework is intended to strengthen oversight of cross-border financial activity, reduce regulatory arbitrage and improve the authorities’ ability to detect, deter and disrupt illicit financial flows.
Earlier draft rules target cross-border transfers
The latest proposals follow a draft framework published earlier this month covering reporting requirements for cross-border crypto transfers.
Under the proposed approach, crypto transactions can be treated as cross-border when assets move between a domestic authorized crypto asset service provider and an offshore provider, or from a domestic provider to a non-custodial wallet, resulting in a cross-border inflow or outflow that must be reported to the Financial Surveillance Department, or FinSurv.
The proposals formed part of South Africa’s broader effort to clarify the treatment of crypto assets under its foreign-exchange rules.
Stablecoin activity adds to regulatory focus
Stablecoins are already used in South Africa’s digital-asset market.
According to central bank data, on-chain transactions involving Tether’s USDT across three of the country’s largest licensed crypto exchanges approached 27 billion rand in the year through April.
South African businesses have also used stablecoins for cross-border activities, including receiving dividends and repatriating funds from subsidiaries elsewhere in Africa. The proposed rules could therefore affect companies using stablecoins for transfers and treasury operations in addition to conventional crypto trading.
South Africa does not recognize crypto assets as legal tender. Its central bank has previously identified crypto assets as an emerging financial-stability issue and has continued monitoring stablecoin activity.
Industry raises concerns over impact
People familiar with the matter told Bloomberg that some digital-asset executives believe the proposed framework could make certain transactions more difficult to execute.
The sources said companies are concerned that additional exchange-control requirements could push some activity toward offshore or less-regulated channels if the rules are implemented without changes.
These concerns represent industry views and do not establish the eventual economic impact of the proposed rules.
Authorities say rules are still under review
The proposed framework has not been finalized.
The government published the draft Capital Flow Management Regulations in April and invited public comments. The draft Crypto Assets Manual for cross-border activities was subsequently released in August to provide practical guidance on how the proposed rules would apply to crypto transactions.
In a joint statement, the National Treasury and South African Reserve Bank said they had not yet incorporated all stakeholder feedback because of the timing of the draft’s release and the volume of submissions received.
The authorities said they are continuing to review the framework.
“These are draft requirements, and National Treasury and the SARB, in collaboration with other regulators, are still engaging on various aspects of cryptoassets, including the approach to stablecoins.”
The final framework could therefore differ from the proposals currently under discussion.
Public consultation remains open
Submissions on the proposed framework remain open until September 30, allowing crypto companies and other affected parties to comment before the rules are finalized.
The final exchange-control framework will determine how crypto and stablecoin transfers are treated once the consultation process is completed.
For now, the reported pauses show that the proposed exchange-control changes are affecting some transactions before the framework has been finalized.
Also Read: Fairshake Plans $30M Ad Campaign Against Sherrod Brown
