Key Takeaways
- Finance Minister Enoch Godongwana has suggested that South Africa will revise draft crypto rules.
- Platforms like Luno and VALR warned restrictive rules would drive users into 100% opaque channels.
- Regulators will align future drafts with Financial Stability Board standards and open consultations.
Regulatory Pivot Following Public Pushback
South African financial regulators are rethinking controversial draft proposals to regulate cryptocurrencies following a wave of public pushback, Finance Minister Enoch Godongwana said Wednesday, Oct. 21.
Delivering a budget policy statement, Godongwana acknowledged that the National Treasury and the South African Reserve Bank received thousands of public comments regarding their proposed framework for managing cross-border digital asset flows.
“We received thousands of comments, and it is clear that we need to take a different approach to these amendments,” Godongwana told Parliament. “We must aim to shift away from pre-approvals. Instead, we must assess transactions for legitimacy and tax compliance.”
The initial proposals, outlined in the draft Capital Flow Management Regulations 2026 and a subsequent draft Crypto Assets Manual, sought to combat financial crime and monitor capital leaving the country through blockchain channels. However, industry leaders and crypto advocates warned that the draft framework was overly restrictive, risked driving digital transactions into opaque, unregulated channels, and threatened to undermine South Africa’s standing in the global digital economy.
Of particular concern to critics was a proposal granting the government authority to require individuals holding crypto assets above an unspecified threshold to declare their holdings and potentially force sales to the state in exchange for South African rands. Although regulators originally promised to define those thresholds in the draft manual, no specific figures were provided when the document was published.
The draft manual also proposed a strict system that flagged transfers between domestic crypto asset service providers (CASPs) and offshore platforms or non-custodial wallets. Under those proposed rules, inward and outward transfers involving non-custodial wallets would be banned.
Industry Pushback and Calls for Reform
Industry analysts noted that banning transfers to self-custody wallets would effectively block South Africans from interacting with decentralized finance (DeFi) protocols.
Crypto platform executives were vocal in their criticism of the initial provisions. Luno, a prominent cryptocurrency exchange operating in the region, cautioned that the rules as drafted would inflate costs for everyday users, lock local enterprises out of blockchain innovations, and strip regulators of oversight.
Farzam Ehsani, co-founder and chief executive of exchange platform VALR, advocated for a broader overhaul, calling on authorities to abolish South Africa’s decades-old exchange control regime entirely. Ehsani pointed to former President Nelson Mandela’s 1996 State of the Nation Address, in which Mandela committed to gradually phasing out apartheid-era capital controls.
Ehsani urged regulators that if capital controls remain, they should be applied on a technology-neutral basis rather than restricting specific digital tools.
In his speech, Godongwana signaled that future regulatory guidelines will align more closely with standards set by the international Financial Stability Board.
“Consultations will commence, with the aim of publishing a revised second draft of the regulations for further input,” Godongwana said.
