SA Treasury Draws Fire Over Cryptocurrency Regulation Plans

The National Treasury in South Africa has published a draft manual for public comment that aims to regulate cross-border crypto transactions. The move is part of an effort to strengthen controls on cryptocurrency, but industry players say it's based on a fundamental misunderstanding of blockchain technology.

David Porter, compliance director at AltCoinTrader, argues that the draft attempts to apply traditional exchange-control concepts to a borderless, distributed technology. 'The fundamental blind spot stems from attempting to apply traditional, geography-based exchange control mechanisms to a borderless, distributed technology,' he says.

Farzam Ehsani, CEO of VALR, adds that South Africa would be better served by abolishing exchange controls altogether while preserving reporting and transparency requirements. 'If South Africa chooses to retain capital controls, it should at least apply them on a principled, fair and technology-neutral basis,' he says.

The draft manual sets out the rules for licensed crypto asset service providers (CASPs) when handling cross-border transactions, including what must be reported to the South African Reserve Bank's Financial Surveillance Department. The move has been met with criticism from industry players who say it will stifle innovation and damage the country's crypto industry.