Recent exchange control developments regarding cryptocurrency

In a landmark decision in Standard Bank of South Africa v South African Reserve Bank and Others (047643/2023) [2025] ZAGPPHC 481 (15 May 2025), the Pretoria High Court addressed the regulatory status of cryptocurrencies under the South African Exchange Control Regulations.

The case originated from the liquidation of Leo Cash and Carry (Pty) Ltd (“LCC”), a wholesale trading business that had engaged in significant cryptocurrency transactions. In late 2019, LCC transferred R15 million from its Standard Bank current account into a money market account to secure an overdraft. Of this amount, R10 million was ultimately used to settle debt with Nedbank.

In early 2020, the South African Reserve Bank's (“SARB”), through its Financial Surveillance Department, instructed Standard Bank to freeze LCC’s accounts, citing suspected contraventions of Exchange Control Regulations. SARB alleged that LCC had acquired Bitcoin locally and exported it to foreign exchanges in violation of Regulations 3(1)(c) and 10(1)(c) (“the Regulations”), which prohibit the unauthorised export of currency or capital. The funds were subsequently declared forfeited to the state. The applicant contested this interpretation, arguing that cryptocurrencies do not fall within the definitions of "capital" or "currency" as stipulated in the Regulations.

The Pretoria High Court concurred with the applicant, ruling that cryptocurrencies are not currently classified as "capital" or "currency" under the existing Exchange Control Regulations. Consequently, the court held that transferring cryptocurrencies offshore does not contravene the provisions of Regulation 10(1)(c). However, an application for leave to appeal has been filed, and the matter remains subject to further judicial scrutiny.

“Should the appeal be unsuccessful and the High Court's ruling stand, the practical implication is that cryptocurrencies may continue to be exported without prior approval from the SARB. This reflects the current status quo, as the lack of clear regulatory guidelines has created a legal grey area that allows traders to operate amid uncertainty,” explains Megan Landers, Senior Manager at AJM.

While this ruling may be perceived as a temporary victory for cryptocurrency traders, it is unlikely to represent the final stance on the matter. Regulatory bodies are aware of the existing gaps and are expected to introduce clarifications or amendments to the Exchange Control Regulations to address the treatment of cryptocurrencies.

“The South African tax treatment of cryptocurrencies, on the other hand, is clear. The tax treatment depends on the taxpayer's intention and the nature of the transactions. Where a taxpayer acquires and disposes of cryptocurrency as part of a profit-making scheme or business activity, such as frequent trading or arbitrage, any resulting gains are generally treated as revenue and taxed at the individual's or entity's applicable income tax rate. Conversely, where cryptocurrency is acquired as a long-term investment and later disposed of, any gains may be considered capital in nature and subject to Capital Gains Tax,” says Landers.

Regardless of the classification, all cryptocurrency-related income or gains must be disclosed in the annual income tax return. The South African Revenue Service (“SARS”) has clarified that failure to declare such transactions constitutes non-disclosure, or worse, tax evasion, which may result in interest and penalties being imposed. Moreover, SARS has increasingly employed third-party data sources and international reporting frameworks to identify locally and offshore undeclared cryptocurrency holdings.

“As such, taxpayers engaged in purchasing, selling, or exchanging cryptocurrencies, whether onshore or cross-border, should ensure complete transparency in their tax disclosures and maintain adequate records to substantiate the nature and timing of their transactions,” concludes Landers.

While the Pretoria High Court's ruling provides temporary clarity on the export of cryptocurrencies, the legal and regulatory landscape is likely to evolve. Stakeholders in the cryptocurrency market should remain vigilant and prepared for potential regulatory changes.