South Africa's Cross-Border Crypto Rules Risk Driving Business Offshore

The South African government has proposed new rules for cross-border crypto transactions that could drive legitimate business offshore and undermine the surveillance authorities aim to achieve.

The draft Crypto Asset Manual requires reporting of any transfer of crypto from a local exchange to a private self-custody wallet, a move that has been roundly condemned by industry participants.

Crypto advocates have long argued for self-custody as a more secure way to protect against potential hacks and confiscation by the state. However, the proposals would allow an individual to transfer crypto from an authorized South African provider to a private wallet, but prohibit transferring it in the opposite direction - from a private wallet into an authorized local exchange.

This creates a 'one-way door', allowing crypto assets to leave regulated SA exchanges for self-custody but preventing them from returning through the same route. Industry participants fear that this could drive businesses involved in market-making, treasury, technology, and other digital asset activities abroad, leaving only the regulated, client-facing function in South Africa.

According to Carel van Wyk, CEO of MoneyBadger, the need to report any transfer from a local exchange to a private wallet may face legal challenge as a violation of both privacy and property rights.