Standard Bank of South Africa v South African Reserve Bank and Others (047643/2023) [2025] ZAGPPHC 481 (15 May 2025)

 Background facts (with reference to the exchange control regulations)

Exchange Control Regulations (“Regulations”), were introduced into South Africa in 1961, with the primary aim of providing stability to the South African currency and to protect the value of the ZAR in the interest of balanced and sustainable growth at the time of political instability.

Owning and trading in cryptocurrency has become more common place since their introduction almost 15 year ago, and yet crypto assets are still not regarded as legal tender in South Africa.

Although working groups have been established, with the hope of clarity being provided from a regulatory body from an exchange control perspective, it is the view of the South African Reserve Bank (“SARB”) that crypto assets are not guaranteed or backed by the SARB and no regulatory compliance framework has been proposed or set out as a result.

From a SARB perspective, only an individual exchange control resident can acquire foreign crypto assets by externalising foreign currency using their approved annual allowance of R10m of R1m to purchase crypto assets on a foreign exchange.

It is, however, common place for South African individuals and companies to purchase crypto assets on a local exchange which are in turn traded for other foreign crypto assets via the investor’s crypto wallet.

In the last few years, the SARB, in conjunction with SARS, have been conducting investigations into various crypto asset transaction, and are of the view, that certain crypto asset transactions have resulted in a contravention of Exchange Control Regulation 3(c) and Regulation 10(1)(c) of the Regulations.

• Regulation 3(c) of the Regulations, dealing with “the exportation of currency, gold, securities etc.. and the import of South African bank notes… “ states that no person shall, subject to permission from treasury, make any payment to, or in favour, or on behalf of a person resident outside the Republic or place any sum to the credit of such person.”
• Regulation 10(1)(c) of the Regulations then sets out the rules relating to the exportation of capital from South Africa in which it is states that  “no person shall, except with permission granted by the Treasury and in accordance with such conditions as the Treasury may impose, enter into any transaction whereby capital or any right to capital is directly or indirectly exported from the Republic.”

In the case of crypto assets, that are not regarded as legal tender, the question has therefore been posed as to whether these assets are in fact capital or the right to capital and whether the above regulations can apply.

When trying to determine whether an asset is capital of nature, in the Oilwell[1] case, it was concluded that intellectual property rights, did not fall into the meaning of capital in terms of Regulation 10(1)(c).  Following this judgement however, the regulation was amended to now include intellectual property as part of the definition.

Up until now, it was the view of the SARB that the purchase of crypto assets in South Africa would be akin to the acquirer being granted the “right to capital”.  Where a person therefore acquires crypto assets on a foreign exchange as a result of a trade being made on a local platform, and retained abroad, this transaction would be a contravention of regulation 10(1)(c) where the value of the assets was not repatriated to South Africa within the required time period of regulation 3(1)(c)?

The respondent party in the Standard Bank v SARB case put forward the argument that money was defined to included “foreign currency or bills of exchange or other negotiable instruments”.  With all parties agreeing that crypto currency is not legal tender it was argued that “the moment the rands were paid into a South African cryptocurrency wallet, the rand lost their character and became crypto currencies and the rand value was forever lost from the South African balance sheet”.

Case findings

In a final judgement Standard Bank v SARB, dealing the forfeiture of funds linked to crypto currency transactions, it was concluded that crypto currency did not fall into the definition of money or capital, as addressed in Regulation 10(1)(c) and that there was no regularity framework set out by the SARB to address the treatment of crypto currency in relation to exchange control requirements.

The courts were also of the view that “one cannot say that the SARB has been caught napping” as an academic paper was published by the SARB in 2020 highlighting the potential risks as a result of the lack of a proper regulatory framework that could lead to a problem of being able to endorse the principle of a payment system.

The SARB were urged to pay serious attention to the need for legislative rules to be carved out from an exchange control perspective and to update the Regulations in the context of the current global economy.

Key takeaway comments

In light of the unfavourable verdict, the SARB have applied to the courts for leave to appeal. Without the support of legislative framework surrounding crypto assets and exchange control it will be interesting to see the final outcome to this case.

¹_{Oilwell v Protec (295/10) [2011] ZASCA 29 (18 March 2011)}

Author:

Sharon MacHutchon, Manager