SARB Freezes Kastelo's Accounts Amid R4 Billion Crypto Allegations

The South African Reserve Bank (SARB) has frozen the bank accounts of Kastelo, a Cape Town-based crypto arbitrage fintech, over alleged exchange-control contraventions involving approximately R4 billion, roughly $246 million.

Kastelo disputes these allegations. However, the case raises significant regulatory questions that are not unique to this company and exist across multiple African markets.

Crypto arbitrage itself is not unlawful in South Africa, but Kastelo's business model allegedly exploited a quirk of the country's apartheid-era exchange controls to make consistent money by buying crypto cheaply offshore and selling it at a premium locally.

The SARB alleges that Kastelo used third-party allowances to acquire foreign currency for its own benefit without permission, offered financial bonuses to individuals in exchange for using their personal allowances, and misrepresented aspects of its business model.