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The crypto community is in confusion – and anger – over where is stands in terms of exchange controls.
The Johannesburg High Court recently ruled that cryptocurrency qualifies as both “money” and “capital” under South Africa’s exchange control regime. That may seem like a very technical distinction – money being something you exchange for something else; capital being stored wealth.
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What this court decision means is that crypto is subject to exchange control regulations.
This decision directly contradicts a May 2025 judgment by the Pretoria High Court, which held that cryptocurrency falls outside the definition of both money and capital under the regulations.
So we have contradictory judgments coming on top of proposed new exchange control regulations that have been slammed by many in the crypto community for overreach.
For example, you may be asked by a border agent for your crypto wallet password. Think about that for a moment, and the potential for things to go badly wrong.
“Effectively, we have two courts with the same kind of stature that have opposing judgments. [This means] regulators themselves are at odds with one or the other of these judgments,” says VALR CEO Farzam Ehsani on this latest episode of Moneyweb’s Crypto Pod.
That means the Supreme Court of Appeal will have to adjudicate the matter.
“We are on the cusp of creating needed clarity for the industry. Until now, the industry hasn’t had the clarity that it needs.”
Crypto exchanges have been asking for clarity on what reporting regulators require, only to be told to wait for the regulations to be published.
“These draft regulations don’t make sense to me. They’re overly restrictive. They look at the externalisation of value at the time of purchase. At the time of purchase, there is actually no movement of value on an exchange like VALR. It’s literally just a ledger entry.
“So it really doesn’t make sense.”
The amount of reporting that would be required to enforce these regulations would create enormous noise for regulators.
Crypto holders would be required to declare when and how they bought the assets and where they are being held – creating a mountain of compliance traffic for exchanges and regulators.
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“These also introduce a lot of security issues for people who are holding crypto assets. Then there’s this determined threshold, this figure that we don’t know what it is yet, below which everything is okay, above which nothing is okay, it seems.”
Capital outflow concerns
What regulators are trying to do remains unclear – are they trying to prevent capital from flowing out of the country?
“There’s a lot of discussion about the loss of capital to South Africa. And in a rand-based economy, there isn’t any loss of capital to South Africa because every single rand, digital rand – which constitutes 97% of all our money – exists by virtue of existing on the systems of the banks.”
The notion that rands can be externalised is a fatal misunderstanding of how capital actually flows.
“Let’s say I’ve bought dollars and I’ve sent dollars offshore. In order for me to do that, there has to be another party that sells me the dollars and buys my rands. And as a result, the rands just move from my ownership to someone else’s ownership. And there is no loss of capital to the economy whatsoever. This is a very important concept.”
“So the question I always have is: what exactly are we trying to regulate here? What are the risks that we’re trying to mitigate? We need to go back to first principles.
What I’ve been saying very publicly is that I really don’t believe that capital controls in general, forget about the crypto asset part, but capital controls in general don’t serve South Africa anymore.”
Read: Dawie Roodt: Do we still need exchange controls?
If regulators are concerned about money laundering, terrorism financing or sanctions risks, there are other regulations already dealing with these.
SA has a perfect opportunity right now to lift exchange controls, not tighten them, and signal its entry into the global economy after decades in the wilderness. It will unleash innovation and attract capital flows. Unless we change course, the economy will suffer.
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