VALR, Luno form coalition opposing South Africa's exchange control rules

A coalition of digital asset firms in South Africa has launched a campaign opposing the draft Crypto Assets Manual for Cross-Border Activities proposed by South African authorities. The coalition, named the Crypto Asset Taskforce for Advancing Sound, Technology-Neutral Regulation for Opportunity, Prosperity and a Healthy Economy (CATASTROPHE), includes VALR, Luno, AltCoin Trader and EasyEquities alongside other members of the public. 

Driving the news: The campaign, launched on Sept. 9, targets the South African National Treasury and the South African Reserve Bank (SARB).  

• CATASTROPHE warned that some restrictions could harm local businesses and force legitimate crypto trade into unregulated foreign exchanges. 
• Instead, the group wants licensed crypto companies to face the same permissions and reporting for equivalent cross-border activity. 

Dive deeper: SARB and the National Treasury published the draft Capital Flow Management Regulations on April 17 and the manual for cross-border activities on Aug. 3. 

• The drafts would bring crypto assets into South Africa’s capital-flow management framework and replace the Exchange Control Regulations of 1961. 
• The manual proposes that resident businesses should be restricted from transferring assets from a local exchange to an offshore one, a provision central to CATASTROPHE’s pushback. 
• Such activities are marked as ‘non-permissible’ in the manual, essentially blocking corporate cross-border crypto transfers. 
• However, individuals can move assets to offshore exchanges or self-custodial wallets subject to regulatory requirements. However, movement of assets in the opposite direction is also tagged ‘non-permissible.’ 
• The manual also allows individuals to move up to R2 million in crypto offshore each year, and those with verified tax compliance can move up to R10 million. 

Why this matters: Regulators say the framework is intended to “minimize the risk of regulatory arbitrage” and strengthen financial surveillance of cross-border crypto activity. 

• SARB said the rules will strengthen its financial surveillance department (FinSurv)’s ability to detect and curb illegal flows across borders. 
• Last November, SARB’s governor Lesetja Kganyago said that dollar stablecoins can undermine African monetary sovereignty and should be regulated accordingly. 

What people are saying: There has been significant blowback since the draft regulations were published earlier in the year. 

• South African nonprofit organization Sakeliga described the rules as ‘irrational’ and an ‘infringement of basic constitutional rights.’ 
• It objected to provisions requiring people whose crypto assets are forfeited to provide passwords, PINs or codes needed to take control of the assets. 
• Jannie Rossouw, a former deputy general manager at SARB, also criticized the proposed 30-day window for declaring assets above an unspecified threshold. 

What to watch: SARB is keeping the window for submitting written comments on the proposed rules open till Sept. 30. 

• It remains to be seen whether the blowback following the release of the draft rules will prompt regulators to revise their positions.