South Africa's National Treasury has released a draft regulation that could force cryptocurrency holders to surrender their digital assets. The proposed rules — part of the Draft Capital Flow Management Regulations 2026 — mark the first wholesale replacement of the country's exchange control framework in over six decades.
Under the draft, authorities may compel individuals to sell their crypto holdings and convert them into local currency at an official rate. This "compulsory surrender" mechanism is not a tax but a forced conversion, sparking immediate backlash from the crypto industry.
Industry Leaders Sound Alarm
Farzam Ehsani, CEO of VALR — South Africa's largest cryptocurrency exchange — called the proposal "alarming" and warned it could push crypto businesses and investors out of the country. "The rules treat crypto as a threat rather than an opportunity," Ehsani said. Financial expert Steven Sidley also criticized the plan, arguing that it repurposes outdated methods designed for a different economic system.
Search Powers at Airports and Border Points
Regulation 4 of the draft grants officials broad authority to search and seize assets. According to Ehsani, this would "presumably include searching your phone for crypto-related apps at all airports and points of exit." The lack of clear thresholds for triggering these rules — left to the discretion of government officials — adds further uncertainty for users who may unknowingly violate the law.
Penalties: 1 Million Rand and Five Years in Prison
Violators face a fine of approximately 1 million rand ($60,480) and up to five years in prison. Industry experts warn that such harsh penalties could hamper innovation, push crypto investors to jurisdictions with friendlier regulations, and even impact tourism from tech entrepreneurs and digital nomads.
The draft is still in a public consultation phase, but the fierce opposition from South Africa's crypto sector suggests a contentious road ahead.