Crypto Loophole Closed: SARB Moves Swiftly to Rein In Unregulated Transfers

In a country where financial regulations are strict and capital movement is closely monitored, the recent High Court ruling that excluded cryptocurrencies from South Africa’s exchange control laws sent shockwaves through legal and financial circles.

But the celebration didn’t last long.

Just two weeks after the Pretoria High Court’s decision, the South African Reserve Bank (SARB) filed an appeal, effectively slamming the door shut on what could have been a massive regulatory loophole.

The Case That Opened Pandora’s Box

The entire matter stems from a long-running legal battle involving Standard Bank, the SARB, the Minister of Finance, Nedbank, and the liquidators of Leo Cash and Carry (LCC). The retail company had gone belly-up in 2022, but not before moving over 4,400 Bitcoin — worth more than R550 million at the time — to a Seychelles-based crypto exchange.

SARB’s Financial Surveillance department (FinSurv) flagged this as suspicious. It looked like a textbook case of capital flight — just done in crypto.

But when the matter landed in court, the judges saw things differently. They ruled that cryptocurrencies, at least in their current legal definition, don’t fall under South Africa’s exchange control regulations. In simple terms: moving money out of the country using crypto wasn’t technically breaking the law.

SARB Says: Not So Fast

That interpretation didn’t sit well with the Reserve Bank. On Monday, SARB filed a formal appeal, arguing that the High Court had made several errors in its judgment.

In their view, the ruling misclassified crypto. SARB maintains that digital currencies should fall under the definition of capital, money, and foreign currency in the context of exchange controls. And they believe the court overlooked key aspects of Regulation 22C, which allows the Reserve Bank to step in when it suspects rules are being broken.

SARB’s legal team is pushing to have the court decision reversed, saying that allowing cryptocurrencies to exist outside of exchange controls creates a glaring vulnerability in South Africa’s financial system.

What This Means for the Future of Crypto in SA

Financial experts aren’t surprised by the Reserve Bank’s fast response. Harry Scherzer, CEO of Future Forex, put it bluntly: “It was clear SARB made a mistake. This loophole basically made all of exchange control law pointless. People could just convert their rands to crypto and send it offshore. No monitoring. No oversight.”

The real surprise, Scherzer adds, is how quickly SARB reacted. In a world where government responses to tech innovation are often slow and reactive, this lightning-speed appeal is notable. “It’s a good thing,” he says. “If SA wants comprehensive exchange controls, crypto can’t be the backdoor.”

What’s Next: Tighter Rules Incoming?

This case is more than just a legal scuffle over a bankrupt company’s crypto transfers. It’s a sign of what’s to come. SARB’s appeal is already hinting at regulatory reform — one that could soon expand definitions in the law to include cryptocurrencies explicitly.

That means South Africans using digital assets might soon see new restrictions on how and where they can move their money. While crypto enthusiasts may see this as a step backward, policymakers argue it’s about keeping the system fair, transparent, and secure.

The Wild West May Be Closing

For a brief moment, it seemed like crypto had created a legal escape hatch from South Africa’s strict financial controls. But that moment is over.

With SARB’s appeal, the country is sending a clear message: just because something is new doesn’t mean it’s outside the law. Regulation is catching up with innovation — and if you’re trading or moving money in crypto, you’d better be paying attention.

{Source: The Citizen}

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