VALR Warns South African Crypto Rules Risk Driving 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. 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.

Ehsani noted that while some adjustments in the draft are positive, the proposals remain prejudicial to licensed local operators. He argued that the restrictions create perverse incentives for businesses and retail users alike by blocking legitimate corporate transactions.

The framework restricts corporate entities from conducting cross-border crypto transactions and classifies several inbound transfers originating from private, non-custodial self-custody wallets as non-permissible for local CASPs (Crypto Asset Service Providers). Ehsani warned that these restrictions will drive transactions underground or offshore, reducing the very visibility and surveillance that National Treasury and the SARB seek to achieve.

Ehsani also highlighted concerns regarding self-custody wallets, noting that treating transactions from non-custodial wallets as non-permissible is neither practical nor sensible. He expressed optimism that the consultation process would yield a more balanced regime.