Cryptocurrency and the Mangundhla judgment consequences for banking, finance, insurers and reinsurers
The Gauteng High Court judgment in Mangundhla v South African Reserve Bank [2026] ZAGPJHC 383 (the “Mangundhla judgement”), has significant implications for the banking and finance sector as well as the insurance and reinsurance market. The judgment holds that Bitcoin constitutes both “money” and “capital” for the purposes of Section 10(1)(c) of the Exchange Control Regulations, 1961. However, the reasoning is open to analysis and is difficult to reconcile with the position taken by the South African Reserve Bank and the Financial Sector Conduct Authority themselves, as well as with National Treasury's recognition, in the Draft Capital Flow Management Regulations, 2026, that the existing regulatory framework requires amendment to accommodate crypto assets.
The applicants used a cryptocurrency trading account to transfer a significant amount of Bitcoin to wallets accessible only through cryptocurrency exchanges registered outside of South Africa, without the South African Treasury’s permission. The Reserve Bank considered the transactions to be unlawful exportation of capital and ordered forfeiture of the applicant’s cryptocurrency and money. The applicants argued that the cryptocurrency fell outside of the relevant regulations.
The court held that Bitcoin is “capital” within the meaning of the relevant regulation, defining capital as any financial asset capable of holding value or being used as a medium of exchange. It therefore adopted a purposive approach to the meaning of “capital”, arriving at a functionally oriented definition. It further held that Bitcoin is “money” for the purposes of the forfeiture provisions and falls within the definition of a “negotiable instrument”, exhibiting all the general characteristics of money.
The judgement expressly disagreed with the 2025 decision in Standard Bank of South Africa v South African Reserve Bank which found that cryptocurrency is neither money nor capital.
The Mangundhla court said that the Standard Bank case erred in emphasising the intangible and technological characteristics of cryptocurrency, which “overlooked the real world consequence of its use”. The court described the claimants’ submissions placing reliance on these characteristics as “entailing a degree of magical thinking that misconstrues the nature of money, underplays the destructive effects of unregulated capital flows and ignores the fundamental purpose of the exchange control regulations”.
The court did not need to decide whether all cryptocurrency (other than Bitcoin) constitutes “capital”, but remarked that “to the extent that any cryptocurrency is a financial asset capable of holding value or being used as a medium of exchange, it seems to me that it must also be “capital” under section 10 (1) (c)”.
Banking and finance perspective
The judgment raises questions about the comparison between the court’s reasoning and recent regulatory developments.
On 21 May 2026, just days before the judgment was handed down, the South African Reserve Bank’s National Payment System Department and the Financial Sector Conduct Authority issued a Joint Communication on crypto assets for domestic payment purposes (the “Joint Communication”). The Joint Communication states that crypto assets “are neither money as defined in the National Payment Systems Act, 1998 nor funds and are therefore not legal tender” and that unbacked crypto assets such as Bitcoin “are not well-suited to perform the function of money”. There is a tension between this position, what was argued by the South African Reserve Bank in the Mangundhla case, and the court’s finding that Bitcoin is “money” and a “negotiable instrument” under the Exchange Control Regulations.
National Treasury has also published the Draft Capital Flow Management Regulations, 2026, intended to replace the Exchange Control Regulations, 1961. The draft regulations define “crypto asset” and amend the definition of “capital” to include crypto assets. National Treasury also intends to create a new category of “authorised crypto asset service provider[s]” with a dedicated regulatory framework distinct from the existing framework for foreign currency and gold. The draft regulations exclude crypto assets from the definitions of “currency” and “foreign currency”. The fact that it was considered necessary to introduce these express provisions may suggest that the existing definitions did not encompass crypto assets, although the Mangundhla court’s purposive approach would treat this as a clarification rather than an extension of the law.
The judgment’s purposive interpretation of “capital” and “money” carries implications for the debate between broad and restrictive approaches to statutory construction. The Exchange Control Regulations carry severe consequences, including forfeiture of assets. The Standard Bank judgment favoured a restrictive interpretation given those consequences, while the Mangundhla judgement prioritises the functional and economic characteristics of Bitcoin over its technological novelty. The conflict between these approaches remains unresolved.
For banks and authorised dealers, this judgment raises practical compliance concerns. If Bitcoin is “capital” and its transfer to a foreign exchange constitutes “export”, banks facilitating fiat-to-crypto transactions may face exposure. The forfeiture orders in Mangundhla extended not only to the Bitcoin in the applicants’ Luno wallets but also to the money in their Standard Bank accounts. For cryptocurrency exchanges, if the reasoning is followed, transfer of Bitcoin to a wallet on a foreign exchange would require National Treasury’s permission.
The Mangundhla judgement’s treatment of “export” also raises questions. It was held that crediting Bitcoin to a wallet on a foreign exchange which is accessible from anywhere in the world including South Africa is sufficient to constitute export. The Draft Capital Flow Management Regulations address this by defining “transfer” broadly and in technology-neutral terms, which may indicate that the existing concept of “export” does not readily accommodate crypto asset transactions.
Insurance and reinsurance perspective
The Mangundhla judgment has practical implications for the insurance and reinsurance market, including for policy placement, the drafting and interpretation of insurance and reinsurance policy wordings and coverage.
Insurers should consider whether their existing definitions of key terms such as "money", "funds", "assets", "property", "securities", or "capital" are sufficiently clear to include or exclude digital assets. If policy wordings use broad or undefined terms, courts may well apply the same reasoning to bring cryptocurrency within (or outside of) the scope of coverage. Where an insurer intends to exclude cryptocurrency-related losses, any exclusion must be drafted with precision, using technology-neutral language that captures the substance of digital asset transactions rather than relying on descriptions of legacy financial instruments alone.
The court's treatment of Bitcoin as a "negotiable instrument" for the purpose of bringing it within the definition of "money" under the Regulations is questionable but must be noted. Crime and fidelity policies, as well as professional indemnity policies, frequently deploy terms such as "negotiable instrument" or "money" without specific reference to digital assets. Insurers should review whether such terms, in the context of their policies and underwriting intentions, could be interpreted to extend to cryptocurrency.
The Mangundhla judgment underscores the importance of keeping policy wordings aligned with evolving regulatory frameworks. The court emphasised that even though cryptocurrency was not within the contemplation of the original drafters of the 1933 and 1961 legislation, the purposive interpretation of the Regulations requires their application to modern financial realities. Courts could adopt a similar approach when construing policy wordings, particularly where coverage terms are not expressly limited to traditional asset classes.
Claims handlers and adjusters should be equipped to identify whether a notified loss involves digital assets and if so, to assess whether policy coverage extends to those assets under the relevant wording.
If cryptocurrency may have been used as a mechanism to circumvent exchange controls, consideration should be given to underlying illegality or regulatory non-compliance and the effect on coverage.
The Mangundhla judgment also has implications for the wording of reinsurance contracts. Reinsurers should consider whether their treaty and facultative wordings adequately address the classification of digital assets. Where a reinsurance contract responds to "original losses" or uses terms such as "money", "capital", or "property" in defining the scope of cover, the reasoning suggests that these terms may be construed broadly enough to encompass cryptocurrency. Reinsurers will wish to define whether they are exposed to digital asset risks and consider incorporating specific provisions.
Where underlying insurance policies are found to cover cryptocurrency-related losses (whether by express wording or judicial construction), reinsurers may face claims that were not contemplated when the reinsurance programme was bound. The judgment is a reminder of the importance of clearly defining the scope of risks assumed, particularly in classes such as crime, fidelity, cyber, and professional indemnity, where digital asset exposures are most likely to crystallise.
Ransomware payments are frequently demanded in Bitcoin and paid to wallets controlled by foreign-based threat actors. Under the court's reasoning that Bitcoin is capital requiring Treasury permission to export, such ransom payments may themselves carry the risk of exchange control violations.
The Mangundhla judgment is potentially significant for insurance and reinsurance brokers. Brokers owe a duty to exercise reasonable skill and care in the placement of cover, which includes ensuring that the scope of coverage is appropriate to the client’s risk profile. Where a client holds, trades in, or is otherwise exposed to digital assets, brokers should proactively enquire about those exposures and assess whether the policy appropriately covers them. A failure to do so could expose a broker to professional negligence claims.
The court adopted a purposive approach to statutory interpretation, holding that the substance of an asset, and its ability to hold value and function as a medium of exchange, is determinative, not its technological form. The court cautioned that "courts should be careful not to ascribe unusual or irreducibly exotic properties to phenomena which, though novel and perhaps unique in some respects, exhibit precisely the attributes an enactment is intended to regulate". This signals the willingness of courts to look through the technological novelty of digital assets and apply existing legal frameworks to their real-world economic consequences. The same approach can be applied to the interpretation of policy wordings, exclusions, and regulatory definitions.
Final word
The factual matrix of the Mangundhla judgment, in which cryptocurrency was used without exchange controls to move approximately R182 million out of South Africa, illustrates the potential for digital assets as tools for regulatory avoidance, money laundering, and sanctions circumvention. This is a material risk for insurers writing crime, fidelity, directors' and officers', and professional indemnity cover, for the reinsurers of those classes, as well as for banks. The judgment reinforces the need for robust frameworks to address emerging risks.
The Mangundhla judgment expressly departs from the Standard Bank judgment, which had held that cryptocurrency is neither money nor capital and an appeal is likely. The existence of conflicting court authority creates uncertainty, which will only be resolved by the Supreme Court of Appeal or the Constitutional Court. This uncertainty itself is a risk factor for insurers and reinsurers, as coverage disputes involving digital assets may produce unpredictable outcomes until the law is settled or the legislation is changed. In the interim, banks and financial institutions should monitor the progress of the Draft Capital Flow Management Regulations and review their exchange control compliance frameworks in light of the judgment.
