Digital assets and blockchain technology: Regulatory developments and market impact

Impact of new regulations on digital asset related service providers in South Africa

The key regulatory challenges around digital assets in South Africa revolve around three main areas: classifying digital assets as a financial product, regulating activities involving blockchain-based digital assets, and overseeing Crypto Asset Service Providers (CASPs). While blockchain-based digital assets themselves cannot be regulated, the services and activities built upon it, particularly CASPs, must comply with relevant laws and regulations.
A critical challenge is ensuring that only compliant and reputable CASPs are licensed. The Financial Sector Conduct Authority (FSCA) must play a crucial role in maintaining market integrity by filtering out non-compliant and bad actors applying for CASP licensing. Additionally, regulators must ensure CASPs continuously comply with existing laws and regulations through proactive monitoring.
In a landmark move, the FSCA classified blockchain-based digital assets as financial products in late 2022, prompting the registration of CASPs under its current licensing regime. This regulatory shift, aimed at safeguarding market participants, is a crucial step toward South Africa's removal from the Financial Action Task Force grey list. Furthermore, the collapse of FTX in late 2022, driven by corporate fraud, underscored the necessity for regulatory oversight to shield the global digital asset ecosystem from similar shocks.
Importantly, the licensing regime now requires most CASPs to undergo independent audits, an essential measure to ensure transparency, accountability, and ongoing compliance. Forvis Mazars has stepped up in this space, leveraging its deep expertise in the digital asset sector to assist clients with audit readiness and execution. This proactive support not only helps CASPs meet regulatory expectations but also reinforces trust in the broader digital asset ecosystem.

Key regulatory challenges around digital assets

Another significant challenge is taxation. The South African Income Tax Act treats blockchain-based digital assets similarly to traditional financial assets, requiring individuals and businesses to declare their gains when realised. However, many are still uncertain about their tax obligations due to the complexities of digital asset-related transactions. The South African Revenue Services (SARS) has merely stated that the normal rules apply to cryptocurrencies, without providing any authoritative guidance, which has resulted in significant confusion and uncertainty within the market.

This has also led to several Voluntary Disclosure Programmes (VDPs) related to unreported or inaccurately declared gains from digital assets, an area where Forvis Mazars has been actively assisting clients in navigating complex tax obligations. Additionally, the ability of blockchain-based digital assets to facilitate cross-border value transfers raises concerns about compliance with South Africa’s exchange control regulations. In a recent landmark ruling, the Gauteng High Court determined that cryptocurrencies do not fall under South Africa’s Exchange Control Regulations, meaning transactions involving crypto assets are currently not subject to the country’s strict capital export controls. This judgment, which arose from the case between Standard Bank and the South African Reserve Bank, provides temporary relief to stakeholders and clarifies that transfers of cryptocurrencies from local to foreign exchanges do not trigger exchange control restrictions. However, the ruling has been suspended pending appeal, leaving the legal status uncertain and underscoring a significant regulatory gap. Market participants should therefore remain cautious and prepare for potential legislative changes expected within the next 12 to 15 months that could reshape the exchange control landscape for digital assets in South Africa.

Given the complexity of these regulations, Forvis Mazars has been actively assisting clients to ensure they remain fully compliant and act above reproach in all cross-border digital asset transactions.

Evolution of blockchain technology in the Financial Services Sector

Blockchain technology is poised to revolutionise the financial services sector, offering transformative solutions that enhance efficiency, security, and transparency. Notable developments include:

Cross-Border Payments: Blockchain technology enables faster, cheaper, and more secure cross-border transactions, which is particularly beneficial for Africa’s large migrant workforce. This capability reduces transaction fees and execution time, making it a game-changer for remittances.
Tokenisation of Real-World Assets: Tokenisation allows for more efficient and secure trading of assets like property, shares, and financial products, leveraging blockchain technology’s advantages, which include transparency and immutability. For instance, the world’s largest asset manager, BlackRock, recently launched a fund on the Ethereum blockchain with a market capitalisation of approximately 1.7 billion US dollars, demonstrating the growing adoption of tokenisation for managing traditional investments.
The use of stable for transaction facilitation: There was a lot of debate about whether cryptocurrencies should be considered money, which requires fulfilling three key functions - a unit of account, a store of value, and a medium of exchange. Cryptocurrencies like Bitcoin and Ether have shown they can serve as a store of value and a medium of exchange, but they fall short as a unit of account because of their volatility. This issue has been largely resolved by fiat-backed stablecoins, which are cryptocurrencies pegged 1:1 to currencies such as the US dollar, eliminating much of that volatility. These stablecoins combine the benefits of traditional cryptocurrencies while offering greater stability. Because of these features, stablecoins are increasingly used for cross-border transactions, payments, and remittances. Interestingly, in 2024, the transaction value of stablecoins surpassed that of Visa and MasterCard every quarter, a trend that has continued into early 2025. This demonstrates the real benefit and growing importance of stablecoins in supporting traditional payment networks.

Blockchain technology’s transparent and immutable nature significantly enhances fraud prevention and auditability. Every transaction is permanently recorded on the blockchain, creating an easily verifiable and tamper-proof audit trail that reduces the risk of fraudulent activity. These characteristics have proven particularly valuable in forensic investigations—an area where Forvis Mazars has supported clients by leveraging blockchain’s traceability to uncover irregularities and strengthen internal controls.

Looking ahead, blockchain’s ability to move value across the internet as seamlessly as information, and to tokenise real-world assets, is unlocking new opportunities for capital raising and asset trading. This innovation enables, for example, a startup to tokenise its shares on a blockchain, allowing investors to purchase fractional ownership with ease, all while bypassing traditional financial intermediaries.

Conclusion

South Africa’s regulatory developments around blockchain technology and digital assets mark a crucial turning point in ensuring market integrity, protecting stakeholders, and aligning with global standards. As the technology continues to evolve, blockchain’s applications, particularly in the financial sector, are set to expand, driving greater efficiency, security, and transparency across industries.

For businesses navigating these changes, working with a trusted advisor who understands both the technology, financial reporting, and the regulations will be key to seizing opportunities while mitigating risks.

 Author:

Wiehann Olivier, Partner