Investors brace for state-led assault on crypto asset ownership and privacy

If you believe the latest headlines, the South African government is preparing an all-out assault on your crypto assets and financial privacy. The 35-page draft Capital Flow Management Regulations, issued by National Treasury (Treasury) under the Currency and Exchanges Act, 1933, have crypto investors up in arms as digital assets become entangled in South Africa’s legacy exchange-control machinery.

Digital expropriation?

The online media have been having a field day since the draft landed. According to MyBroadband, ‘Treasury and the Reserve Bank want to expropriate cryptocurrency in SA’; Moneyweb declares, ‘Bitcoiners outraged by SA’s biggest exchange control revamp in decades’; Daily Friend cautioned that ‘Treasury is coming for your bitcoins’; and Daily Maverick pondered whether the furore around the proposed regulations was truth-based or could be dismissed as hysterical. 

As they might say in the halls of Parliament: The ‘hystericals’ have it. There is enough evidence to show a concerted effort by the South African Revenue Service (SARS), the South African Reserve Bank (SARB) and Treasury to force crypto assets into the state’s exchange-control and taxation regimes, all the while getting a clearer look into your personal finances and preventing you from transacting unconstrained. 

Investor concern is warranted in a country that boasts a shiny, new Expropriation Act, and where expropriation by stealth, whether through prescribed assets in the retirement funding sector or the repurposing of medical schemes’ reserves to allow for National Health Insurance (NHI), remains a distinct possibility. In their proposed form, the capital flow management regulations give Treasury unprecedented powers to access and control crypto assets, including assets held in digital or hardware wallets, and to attach, forfeit or dispose of said assets where it suspects a contravention of the law. 

Compliant investors have nothing to fear?

The regulations look set to create two types of investors. On the one hand, those who hold a modest sum in crypto assets on a licensed, local crypto asset service provider (CASP). On the other hand, those who use offshore exchanges or hold self-custody wallets could be under close scrutiny. As long as you declare your purchases and transaction gains and losses, and are not using your crypto accounts to move capital offshore or avoid tax, you should have little to fear. 

As is often the case, the danger is in the missing detail. The draft allows the Minister of Finance and ‘authorised persons’ wide powers if an investor’s crypto asset holdings or transaction exceed thresholds or the individual is suspected of breaching the regulations. But the draft does not put a value to the threshold, allowing instead for the minister to determine an appropriate threshold from time to time, nor does it narrow down who the minister might appoint to harass citizens. 

An intervention that starts as a reasonable (sic) R5 million threshold and ‘Treasury agents only’ could soon morph into R100 000 and anyone working for the conduct authority, customs, immigration, the South African Police Service (SAPS) and more. Besides, how would they know whether you exceeded the threshold without having a quick peek? Until we know what the threshold is, and how authorised persons will go about enforcing the regulations, we have to fear the worst. And that worst takes the guise of a de facto chokehold on crypto asset use. 

The MyBroadband write-up suggests that industry stakeholders are less than happy with the regulatory trajectory. Criticisms included that the proposed rules raise serious constitutional concerns; an all too familiar trend for those following developments in the broader expropriation and NHI contexts. One of the major concerns is that crypto asset holders will have to seek permission when transacting above the threshold, and outside the CASP environment. 

Declaring war on crypto assets

Writing for the Daily Friend, freelance journalist Ivo Vegter said that government was declaring war on crypto assets. “In a draft proposal that reads like dystopian sci-fi, Treasury has decided that cryptocurrencies … are now just another capital class for the government to domesticate, restrict, monitor and confiscate.” He adds that rather than modernising outdated exchange controls, the draft “extends the state’s suffocating grip over currency into the digital realm.” 

Vegter noted that despite changes introduced via the 2026 National Budget, SA’s exchange controls remained massively restrictive. “The 35 pages of bureaucratese in these draft regulations reveal not so much the intention of reforming or modernising the capital control regime, but the far more sinister objective of bringing crypto assets under the state’s control mechanisms,” he wrote, adding that cryptocurrencies and other crypto assets will become subject to the same stranglehold that has throttled South African capital mobility for decades. 

The draft redefines capital broadly enough to include crypto assets. Regulation 8 then requires individuals to declare crypto assets above a threshold, and allows Treasury or authorised CASPs to purchase them, with the holder required to sell. This erodes the foundational privacy characteristics of the now established digital asset class; a development that more than satisfies the Oxford Dictionary’s definition of draconian. 

Going next level on the nanny state concept

Readers can gauge the level of the state’s proposed intervention by poring over regulation 10. It reads, “Every person in the Republic must, within 30 days or such period that may be prescribed, after obtaining control, or possession or becoming entitled to sell, procure the sale of, or transfer, any foreign asset or crypto asset, make a declaration in writing, in the form and manner prescribed to the Treasury or to an authorised person…” Nanny state much? 

Regulation 10(2) states that once declared, any foreign asset or crypto asset may not be sold, transferred or otherwise disposed of without the permission of Treasury or the yet-unnamed authorised persons. Furthermore, the sale process must be completed “in accordance with those conditions that the Treasury or an authorised person may impose.” It gets worse. 

In much the same way SARS can dip into your bank account when it decides you owe it money, Treasury now gets access, attachment and forfeiture powers over your crypto assets. The legislation stipulates that the owner or controller of a forfeited crypto asset must hand over all passwords, PINs or codes needed for Treasury to gain access and control. 

“People who are serious about their crypto know that unless you own the private keys, you do not control the crypto,” Vegter wrote. “They insist on ‘self-custody’ [by] keeping the keys on their own computers, phones or dedicated hardware wallets.” He argued that self-custody is the principle that makes cryptocurrencies revolutionary, and that bitcoin was “designed to enable trustless transactions, directly between owners of cryptocurrency, with no broker, bureaucrat or banker standing between you, taking a cut.” 

Regulated CASPs will play ball

As written, the draft will force South Africans above the yet-to-be-determined threshold to invest and transact through regulated CASPs, effectively allowing government to bypass the custody and privacy enhancements introduced by bitcoin and its distributed ledger. 

Quoted on MyBroadband, the BitcoinZAR Advocacy Group said the broad powers of attachment, blocking and forfeiture contradict sections 22 (freedom of trade), 25 (property rights) and 33 (just administrative action) of the Constitution. “Any limitation of fundamental rights must be reasonable, proportionate and clearly defined,” they said. “The current draft falls short of this legal standard by relying on sweeping, undefined discretion.” 

The public has until 18 May 2026 to weigh in on the draft regulations. Carel van Wyk, CEO of Money Badger, is concerned that this window is inadequate. He told MyBroadband that “the public was given a mere 22 business days to analyse the draft, spread awareness, organise responses and submit structured comments.” He encouraged those who care about how SA regulates digital assets to read the draft and make their voices heard before the window closes. Your writer would encourage you to do so too. 

Follow the writer on

LinkedIn: https://www.linkedin.com/in/gareth-stokes-media/

X: @stokesmedia

Comment on this Post

Name*

Email Address*

Comment*

 

Submit Comment