South African Crypto Framework Risks Driving Financial Activity Underground

South Africa's proposed cross-border cryptocurrency framework could severely damage its domestic digital asset industry and drive financial activity underground, according to Farzam Ehsani, co-founder and CEO of VALR.

Ehsani expressed concerns that the draft crypto asset manual released by the National Treasury and the South African Reserve Bank (SARB) attempts to apply decades-old capital controls to modern technology, threatening employment, local investment, and business innovation.

While acknowledging positive adjustments in the draft, such as triggering a reportable event upon withdrawing funds from a crypto asset service provider rather than at the initial asset purchase, Ehsani said the proposals remain prejudicial to licensed local operators.

Ehsani argued that restricting corporate entities from conducting cross-border crypto transactions and classifying inbound transfers originating from private, non-custodial self-custody wallets as non-permissible for local CASPs creates perverse incentives for businesses and retail users alike.