South Africa has taken a hard stance against crypto capital flight. On April 17, the National Treasury published the draft Capital Flows Management Bill, bringing crypto assets under the same stringent cross-border capital controls as gold and foreign exchange. Residents must now route crypto transfers through authorized institutions and declare their holdings, while violations could result in forced sale of assets to the Treasury.
Filling a regulatory vacuum left by a 2025 court ruling
The push for tougher rules follows a legal setback in 2025, when the High Court ruled that bitcoin and other crypto assets are not legally considered money or foreign exchange, stripping the South African Reserve Bank (SARB) of the authority to regulate them under old forex laws. To close this gap, the Treasury drafted the new bill in coordination with the Financial Sector Conduct Authority (FSCA) and the Financial Intelligence Centre (FIC).
Four tough measures: declaration required, forced sale for breaches
The draft bill lays out strict rules for crypto:
- Cross-border transfers restricted: No crypto, currency, gold, or securities may be exported without prior authorization.
- Threshold and mandatory declaration: Crypto transactions above a threshold set by the finance minister must be carried out through authorized Crypto Asset Service Providers (CASPs), with detailed purpose declarations. Residents must also declare overseas crypto holdings.
- Strict “purpose limitation” and forced sale: Asset use must match the declared purpose. If a violation is found, the government can force the sale of the crypto assets to the Treasury or an authorized institution at market price.
- Expanded enforcement powers: Travelers must declare crypto upon entry/exit; authorities can search and seize if there is reasonable suspicion.
Industry split: compliance gain vs. constitutional fight
The draft has drawn mixed reactions. On the positive side, it could enhance South Africa's international compliance standing and give local CASPs a clear legal status similar to authorized forex dealers. However, the “forced sale to Treasury” clause has been criticized as a violation of property rights by legal and privacy advocates, likely triggering a constitutional challenge. The bill is open for public comment until end of June, and the industry is watching closely for possible adjustments.