Corporate Limits and Illicit Flow Risks
South Africa’s new proposed cross-border cryptocurrency framework risks severely damaging the domestic digital asset industry and driving financial activity underground unless key provisions are substantially revised, according to Farzam Ehsani, co-founder and chief executive officer of VALR.
Commenting on the joint draft crypto asset manual released by the National Treasury and the South African Reserve Bank (SARB), Ehsani cautioned that attempting to apply decades-old capital controls to modern technology threatens employment, local investment, and business innovation.
While acknowledging positive adjustments in the draft—specifically that a reportable event is triggered upon withdrawing funds from a crypto asset service provider (CASP) rather than at the initial asset purchase—Ehsani said the proposals remain prejudicial to licensed local operators.
“South Africa would be better served by abolishing exchange controls altogether while preserving appropriate reporting, transparency and regulatory surveillance, rather than attempting to retrofit a half-century-old regulatory regime onto modern technology and the digital economy,” Ehsani told Bitcoin.com News.
Under the draft rules, individual residents are permitted to transfer crypto offshore within existing foreign currency allowances. However, the framework restricts corporate entities from conducting cross-border crypto transactions and classifies several inbound transfers originating from private, non-custodial self-custody wallets as non-permissible for local CASPs.
Ehsani argued that these restrictions create perverse incentives for businesses and retail users alike. By blocking legitimate corporate transactions—particularly cross-border stablecoin payments that offer faster, cheaper, and more transparent settlement than legacy banking networks—the rules will undermine the regulatory oversight authorities are seeking.
“By prohibiting legitimate corporate activity through regulated providers, the proposed framework is likely to drive transactions underground or offshore,” Ehsani said. “This would reduce the very visibility and surveillance that National Treasury and the SARB seek to achieve, while undermining employment, tax revenue, investment, innovation and business formation.”
Ehsani also highlighted concerns regarding self-custody wallets, noting that treating transactions from non-custodial wallets as non-permissible is neither practical nor sensible. He warned that such a restriction will push South African users toward foreign, unregulated exchanges rather than local, licensed platforms, conflicting with the central bank’s objective of monitoring capital within the country.
“If South Africa chooses to retain capital controls, it should at least apply them on a principled, fair and technology-neutral basis,” Ehsani said. “Regulation should govern the movement of value and manage the associated risks; it should not dictate which technologies individuals and businesses can use.”
The VALR co‑founder’s comments come nearly a month after fellow South African exchange Luno formally challenged the proposed capital‑flow rules. As reported by Bitcoin.com News, Luno — which has urged parliament to rewrite the framework — argues that the government’s current approach risks driving crypto activity underground and outside the reach of domestic regulators and tax authorities.
The National Treasury and the SARB have opened the draft crypto asset manual for public comment through Sept. 30. Authorities emphasized that the draft guidelines remain subject to refinement following stakeholder engagement before final implementation.
Ehsani expressed optimism that the consultation process would yield a more balanced regime. “We face a fundamental choice in South Africa: whether we are serious about overcoming our economic challenges, unlocking growth and becoming a globally competitive force, or whether our frameworks undermine those ambitions,” he said.
