South Africa moves to regulate cross-border crypto flows

Instead of creating a broad exemption framework for cryptocurrency exchanges, the South African Central Bank is planning to release a new framework later this year focusing on cross-border cryptocurrency transfers.

Important details of the proposed framework

South Africa is taking important steps towards regulating cryptocurrency trading, as highlighted by a recent statement from Finance Minister Enoch Godonwana. Rather than drafting a comprehensive cryptocurrency exchange management exemption framework, the South African Reserve Bank (SARB) is planning to unveil a new framework that specifically addresses the transfer of crypto assets across borders later this year.

According to the report, Godonwana’s remarks came in response to inquiries from MP Wendy Alexander during a session on the Standing Committee on Finance. They remain exempt from South Africa’s exchange control regulations as the High Court condemned the use of apartheid-era law to regulate crypto assets.

Meanwhile, Godongwana emphasized that the SARB is currently engaged in discussions with the Ministry of Finance and the Financial Sector Action Agency (FSCA) to finalize the framework. This collaboration aims to regulate the business activities of cryptocurrency service providers (CASPs) involved in externalizing and retransmitting value through cryptocurrencies.

The framework is expected to outline key parameters, conditions, management responsibilities and reporting requirements for cross-border transactions, including crypto assets. This structured approach is designed to prevent regulatory arbitration and reduce the risk of illegal financial flows that may arise from such transactions.

Furthermore, the National Treasury is currently engaging SARB in updating and strengthening the framework of exchange control legislation to enable the above framework. Through the Financial Regulatory Authority Steering Committee, including the SARB, FSCA, Prudential Authority and the National Treasury Department — said it would coordinate further discussion.

Godongwana also highlighted the importance of SARB’s new framework in light of risks associated with cryptocurrency. The Intergovernmental Fintech Working Group (IFWG) has previously released a position paper identifying key risks related to crypto assets.

The South African Finance Minister’s statement shows a proactive approach by the South African government to regulate the fast-growing cryptocurrency market. The Domestic Treasury aims to strengthen the existing exchange management legislation framework by engaging with a variety of financial authorities and stakeholders and to ensure it is consistent with the new SARB framework.