South Africa Tightens Crypto Rules Amid Illicit Flow Concerns

South Africa has introduced new proposals to regulate cross-border transactions in crypto assets as part of its efforts to strengthen oversight and curb emerging risks associated with virtual assets.

The Treasury and South African Reserve Bank have published a draft manual for public comment, which sets out the application and adjudication process for authorisation to conduct business related to crypto assets. The manual also provides clarity on when transactions are regarded as cross-border, with a trigger point arising when assets are transferred between a domestic authorised Crypto Asset Service Provider (CASP) and an offshore one.

The new regulations aim to 'minimise the risk of regulatory arbitrage' between regulated entities conducting cross-border activities. They will also enhance the ability of the Financial Surveillance Department to detect, deter, and disrupt illicit financial flows. The draft manual reiterates that crypto assets are not legal tender in South Africa and carries inherent risks.

Last year, the Reserve Bank reported an inventory showing nearly 8 million South Africans have crypto-trading accounts, with almost R63 billion externalised through local platforms since 2019.