The News
South Africa proposed a ban on corporate cross-border stablecoin transactions, setting up a clash with a generation of tech entrepreneurs who say the restrictions will hurt trade, push volumes into unregulated channels, and isolate the country from global capital pools.
The draft rules, released jointly by the South African Reserve Bank and National Treasury, mark one of the most aggressive attempts by an emerging economy to force borderless crypto back into decades-old exchange control rules.
Under the proposal, South African companies would be banned from making cross-border crypto transfers. The rules also block incoming payments from private wallets, and count outgoing transfers as an offshore capital move that triggers exchange control limits.
Farzam Ehsani, CEO of VALR, a Johannesburg-based crypto exchange, warned that rigidly blocking corporate use on regulated exchanges is “likely to drive transactions underground or offshore.”
Luno, another of the country’s leading exchanges, argued that executive branch changes to a 65-year-old framework undermine democratic oversight. Marius Rietz, general manager for Africa and Europe at Luno, said that failing to make room for corporate cross-border stablecoin leaves South African businesses “out of step” with the international ecosystem.
Luno’s comments set the stage for legal challenge, signalling that industry players are laying the groundwork to take regulators to court if Treasury attempts to bypass parliament. The pushback comes as importers across the continent and other emerging markets turn to digital currencies to pay overseas vendors on the spot amid tight bank supplies of hard currency and costly transfer delays.
Pankaj Bengani, co-founder of stablecoin infrastructure network MELD, pointed to Europe’s crypto rules, which have cut off nearly 50 of the world’s top stablecoins, and said South Africa could create a similar compliance challenge if cross-border stablecoin transfers become subject to additional reporting and regulatory requirements.
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South Africa has long used exchange controls to track and limit cash leaving the country to protect the economy by preventing too much cash from flowing overseas all at once. Traditionally, commercial banks enforce these rules through strict paperwork and annual caps.
Because crypto moves globally without traditional banks, it created a regulatory gray area. The draft rules plug this gap, pulling digital assets directly into this legacy gatekeeping apparatus, treating cross-border stablecoin moves as standard bank transfers to keep tabs on money leaving the country.
Individuals can still transfer crypto abroad under personal allowances – up to 2 million rand (~$120,000) annually without pre-clearance and up to 10 million rand with tax authority clearance. Everyday cross-border remittances are capped at 5,000 rand.
Absa, one of South Africa’s largest commercial banks, sees the rules as long-awaited, with Rob Downes, who heads up digital assets at the lender’s corporate banking division, saying bringing crypto platforms under exchange control rules creates clear rules.
Still, he acknowledged that the proposed ban on corporate cross-border stablecoin transactions would “naturally limit immediate opportunities” but said the proposal was intended as a phased rollout that could open up corporate stablecoin transfers down the line.
Public comment on the draft rules closes at the end of September.
The View From Nigeria
On July 31, Nigeria ordered all digital asset traders and exchanges to register for a tax identification number or face fines and a possible prison term, cracking down on tax evasion in its growing cryptocurrency market.
Under new guidelines published by the Nigerian Revenue Service, profits from trading cryptocurrencies, stablecoins, and digital tokens will attract income tax. According to Chainalysis, Nigeria received about $59 billion in crypto-asset inflows between July 2023 and June 2024, ranking second globally on its 2024 Global Crypto Adoption Index.
The policy is part of a broader Abuja drive to raise tax collections from about 13% of GDP to 18% by 2030.
Tiisetso’s view
South Africa is building barricades against a global tide of digital dollars. Banning corporate cross-border stablecoins shields Pretoria’s currency controls at the direct expense of corporate productivity.
For one thing, it forces businesses to rely on slow, expensive bank processes. That smacks of an unwritten tax on trade, widening the competitiveness gap between local firms and global peers. South Africa cannot defend its standing as Africa’s preeminent financial gateway by locking its companies out of 21st-century payment systems.
Room for Disagreement
South African Reserve Bank Governor Lesetja Kganyago said exempting crypto from capital controls would create an unfair distortion. “The fact of the matter is that South Africa has a system of capital flow measures,” he told the central bank shareholders at the annual meeting last week. “But, if we have these rules, we cannot simultaneously have weak regulatory frameworks for crypto assets alongside a rigorous system of reporting and permissions for everyone else. That is not a level playing field. What we are trying to do is get common rules here for everyone.”
Notable
- South Africa made it easier for investors to move money out of the country by scrapping a system put in place more than 60 years ago to prevent apartheid-era capital flight.