The South African Reserve Bank (SARB) has applied for leave to appeal a recent court ruling which found that cryptocurrency is not money and doesn’t fall within existing exchange control regulations.
Specifically, it said the Pretoria High Court erred in finding that cryptocurrency is not considered money for the purposes of South Africa’s Exchange Control Regulations (Excon).
Earlier this month, Judge Mandlenkosi Motha ruled that South Africa’s antiquated Excon rules do not apply to cryptocurrencies and require urgent reform.
“Cryptocurrency is not money. The construction that cryptocurrency is money, by looking at the definition of money, which includes foreign currency, is strained and impractical,” he ruled.
Motha’s ruling also had some strong words for the Reserve Bank regarding its failure to regulate cryptocurrency properly.
“Cryptocurrency has been in existence for over 15 years; one cannot say SARB has been caught napping,” he said.
“In the same way, intellectual property rights had a niche carved for them in exchange control regulations, cryptocurrencies need some legislative attention.”
Motha said a comprehensive regulatory framework to address cryptocurrency was long overdue, explaining that the exchange control regulations were conceived for an entirely different purpose.
“The consequences of the massacre of black people in Sharpeville reverberated inside the corridors of the Apartheid economy and shook the very foundations of the regime,” he stated.
“To stem the tide of the resultant capital flight and a run on the rand, the Apartheid regime passed the Exchange Control Regulations in 1961, which, save for a few changes, is still in place.”
“The vexed question is whether these 60-plus old Excon Regulations are fit for purpose to deal with the machinations in the world of cryptocurrency.”
Motha’s remarks were part of a judgment in a case brought by Standard Bank to overturn an asset forfeiture decision involving a company it wanted to liquidate.
The company, which was a Standard Bank customer, owed the financial institution over R41 million and had allegedly been linked to fraud.
Unbeknownst to Standard Bank, SARB’s financial surveillance division (FinSurv) had begun investigating cryptocurrency transactions of several entities, including the company in question.
The investigation started years before the liquidation and found that the company had bought bitcoins and transferred them to foreign cryptocurrency exchanges.
As a result, FinSurv seized all the assets Standard Bank was hoping to liquidate to cover some of the debt. FinSurv cited exchange control violations as justification for the seizure.
Standard Bank brought the matter before the High Court to argue that there was no exchange control violation, in part because the regulations didn’t account for cryptocurrency.
In his analysis of the facts before the court, Motha summarised why cryptocurrencies defied existing notions of foreign currency and, therefore, exchange controls.
“Cryptocurrency is an asset that is bought and sold. There are practical challenges and implications if cryptocurrency is viewed as money,” said Motha.
“These are, inter alia: can one deposit cryptocurrency? Does one have to declare cryptocurrency when entering or leaving the Republic?”
Motha cited an academic article that SARB and FinSurv put before the court, which said cryptocurrencies are nothing more than code on a digital ledger.
“Thus, they exist anywhere and everywhere and have a global nature,” the article stated.
Setback for SARB and FinSurv
If the Supreme Court of Appeal does not overturn Motha’s ruling, it would be a significant setback for FinSurv.
In 2021, FinSurv came down hard on South African banks to restrict how people may purchase cryptocurrency from offshore exchanges.
As a result of the crackdowns, banks banned customers from using their payment cards to buy cryptocurrency from overseas exchanges.
FinSurv also told MyBroadband at the time that any transfer of cryptocurrency out of South Africa was a criminal offence under existing exchange control regulations.
This includes transferring assets from your own self-hosted wallet to individuals overseas or to decentralised exchanges.
Regulators further warned that “staking” crypto assets could have tax and exchange control implications, though they did not clarify these implications.
MyBroadband asked FinSurv detailed questions about this in 2021. While it did provide feedback on the mechanics of what was permitted, it did not explain the legal basis for its stance.
When El Salvador declared Bitcoin legal tender in 2021, MyBroadband asked SARB whether this means it would be considered foreign currency in South Africa.
This was based on a statement from regulators that the Excon defines foreign currency as any currency that is legal tender elsewhere in the world but not in South Africa.
“The SARB has not taken a final position on the extent to which crypto assets may or may not fall within the definition of foreign currency as contemplated in the Exchange Control Regulations, 1961,” it said at the time.
Notably, El Salvador reversed its decision in 2025 following pressure from the International Monetary Fund. While Bitcoin may still be used for payments, it is no longer legal tender.
Having it both ways
SARB’s argument now that cryptocurrency should be treated like money for exchange control purposes is a typical example of South African regulators wanting their bread buttered on both sides.
The Revenue Service wants to tax gains on cryptocurrency trades and investments at the maximum possible rate as if it were regular money.
However, SARB governor Lesetja Kganyago and other Reserve Bank officials have refused to even acknowledge them as “currency”.
As early as 2018, former SARB deputy governor Francois Groepe said that they didn’t regard cryptocurrencies as currencies or securities.
In fact, they preferred that the term “cryptocurrency” not be applied to them and that people instead call them “cyber tokens”.
Kganyago expressed an updated view in 2021, stating that cryptocurrencies are more accurately described as “crypto assets”.