Anthea Jeffery: Treasury wants to put Bitcoin behind a border it can't find

The IRR’s Dr Anthea Jeffery takes a long hard look at another potential blunder from Pretoria. National Treasury’s Capital Flow Management Regulations, backed by a SARB crypto manual, would treat moving bitcoin from a local exchange to your own wallet as an "export" of capital. Even though no border is crossed and the owner doesn't change. Yet officials could seize the crypto, forfeit it to the state and demand your passwords. Fines run to R1m, or you could face five years in jail. Jeffery calls this 1961-era exchange control stretched over 2026 technology, something which should be scrapped, not expanded..By Dr Anthea Jeffery for The Daily Friend.National Treasury wants to subject bitcoin and all crypto assets to draconian state controls over the deemed “importing” or “exporting” of digital assets that have no geographical location in any country.Instead of crafting legislation for this purpose – which would be subject to parliamentary scrutiny – the Treasury is trying to introduce these controls via two sets of new rules. These are, firstly, the Draft Capital Flow Management Regulations of 2026 (“the Regulations”) it gazetted for public comment in April 2026 and, secondly, a Draft Crypto-Asset Manual for Cross-Border Activities (“the Manual”), recently released by the South African Reserve Bank (SARB) for written comment by 30 September 2026.Unconstitutional interventionsThe Manual fails to explain the legal authority on which it has been drawn up. Instead, it fudges this issue, stating: “The National Treasury is responsible for…regulating and where necessary, prohibiting the import and/or export of crypto assets to/from South Africa… [Relevant] permissions, conditions or exemptions…[relating] to crypto assets are outlined in the Manual and while they have no statutory force, they have the effect of law” (emphasis supplied).The Manual also states – as if this helps overcome the legislative vacuum – that the SARB’s Financial Surveillance Department (“FinSurv”) is “responsible for the day-to-day administration of capital flow management in South Africa.”Where, then, is the legal authority for the Manual to be found? Neither the Treasury nor the SARB has the power to make new rules, as this is the province of Parliament under the separation-of- powers doctrine. In addition, the Treasury has no powers – under the 65-year old Exchange Control Regulations of 1961 – to deal with digital crypto assets, which constitute an entirely different asset class from gold, foreign currencies and securities. Hence, the Treasury cannot validly assign any such powers to the SARB. Moreover, that FinSurv has been made responsible for “day-to-day administration” cannot give the SARB the law-making authority it lacks.“Deemed” imports and exportsBoth the draft Regulations and the Manual make the absurd assumption that bitcoin and other crypto assets – which are digital assets recorded on distributed ledgers stored on thousands of computers spread across the world – are located in one country and can be “exported” to another or “imported” from it.One of the key purposes of the Manual is to try and circumvent this problem by specifying the circumstances in which “crypto asset transactions would be deemed as import or export of capital in terms of the draft Regulations.”One of the most controversial deeming clauses states: “Crypto asset transactions would be deemed as import or export of capital in terms of the draft Regulations at the point where crypto assets are transferred between a domestic Authorised Crypto Asset Service Provider (CASP)…to a non-custodial wallet, resulting in a cross-border inflow or outflow.”What this means, says law firm Baker McKenzie, is that “a transfer from a domestic Authorised CASP to a client’s own self-hosted wallet would be classified as an export of capital, even though no jurisdictional border is crossed and beneficial ownership of the crypto assets does not change.”Draconian penalties for deemed “exports”Once an export is deemed to have occurred under the Manual, various draconian provisions in the Regulations will kick in. First, Treasury, police, and other “enforcement” officers will be empowered to search for and “seize” the crypto assets in issue.Thereafter, such crypto assets “shall be forfeited to the state for the benefit of the National Revenue Fund,” unless “the Treasury…in its discretion, directs [that they] be refunded or returned.”In addition, the owner of the forfeited crypto assets must, on “written demand” by the Treasury, “furnish full particulars in writing of all and any passwords, personal identification numbers or codes” which the Treasury might need to access and then dispose of the crypto assets. These rules infringe several guaranteed rights, including the right to privacy in Section 14 of the Constitution. This gives everyone the right “not to have their person, home…[or] property searched, their possessions seized, or the privacy of their communications infringed.”By allowing forfeiture prior to adequate proof of a prior offence, the Regulations also conflict with Section 25 of the Constitution. Since forfeiture in these circumstances would result in the “compulsory acquisition” or effective expropriation of the crypto assets in issue, the onus lies on the Treasury to prove that the “nil” compensation envisaged has either been agreed with the owner or has been “decided or approved by a court.” Until one or other of these steps has been established, ownership cannot lawfully pass to the state – but the Regulations brush these constitutional provisions aside.The Regulations also enable major penalties to be imposed without adequate proof of an “export” offence. As Werksmans attorneys point out, these penalties include fines of up to R1 million (or the value of the crypto assets, whichever is higher), and/or imprisonment for up to five years.Damaging constraints on deemed “imports”As regards deemed “imports,” the Manual states if “a resident individual requests the transfer of crypto assets from a non-custodial wallet to a custodial wallet hosted by a domestic Authorised CASP,” this will be “a non-permissible transaction.” Such a transaction will thus be strictly prohibited even though, again, no jurisdictional border is crossed and the ownership of the crypto assets remains unchanged.Notes Lindsey Schutters in CryptoCorner in the Daily Maverick: “Restricting transfers from self-custody back into regulated exchanges will not stop South Africans from using crypto; it will simply force them to keep wealth offshore or trade via unverified peer-to-peer grey markets. By building a one-way exit out of the local system, regulators risk inadvertently pushing financial activity into the shadows, defeating the very purpose of financial oversight.”No imports or exports by non-CASP South African companiesAccording to the Manual, “resident entities may not enter into crypto asset transactions deemed as import or export of capital in terms of the draft Regulations.” Such entities include South African companies, trusts, and partnerships.Farzam Ehsani, founder and chief executive of VALR, a major South African cryptocurrency exchange platform, criticises this blanket ban, asking “On what principled basis should corporations and institutions be prohibited from using this technology to move value legitimately between South Africa and the rest of the world?” Barring legitimate corporate activity through regulated providers could also “drive transactions underground or offshore,” he cautions. No provision for stablecoinsAccording to the Moonstone Information Refinery (an industry research hub, among other things), the Treasury and SARB have made it clear that their proposed new rules “do not distinguish between different types of crypto assets and do not recognise crypto assets as an official currency in South Africa.”Marius Reitz, general manager for Africa and Europe of Luno (one of the earliest and largest cryptocurrency investment platforms operating across Africa, Europe, and Asia), warns that this failure to distinguish between stablecoins and other crypto assets will “restrict South African companies from using stablecoins for cross-border commercial transactions, supply-chain payments, and international trade.”Yet stablecoins “enable instant, low-cost cross-border business-to-business payments” and are one of the cryptocurrencies most often used. “Failing to accommodate corporate cross-border stablecoin payments would leave South African businesses out of step with an international ecosystem that is adopting next-generation payment rails,” he cautions.Likely economic consequencesSouth Africa already has a substantial digital asset sector. By 31 March 2026 the Financial Sector Conduct Authority (FSCA) had received 533 licence applications from crypto asset service providers and approved 310 of them. Luno, the largest local platform, says it has more than 6.3 million South African customers and holds more than R30 billion in crypto assets on their behalf. Luno adds that its payment service processed more than 53,000 payments at some 1,900 merchants in its first year, while 50,000 of its South African customers have bought tokenised shares (which are digital versions of shares and exchange-traded funds listed in the United States). VALR reports that more than $15 billion of stablecoins passed through its wallets in a single year.These activities could help quicken South Africa’s slow rate of economic growth. New digita technologies can give growth a much needed boost by reducing the cost of starting a business. Digital assets can reduce the cost of paying suppliers and receiving income across borders, while tokenisation can make it cheaper to issue and trade shares and other securities.Cost reductions of this kind are particularly important in South Africa, which has a very low annual savings rate at some 16% of GDP. In these circumsances, any technology that makes capital cheaper to raise and to move deserves to be encouraged. The same holds true for the next stage of the digital economy, in which software will increasingly buy and sell services on behalf of people and firms – and will need forms of money it can swiftly deploy at any hour.In addition, digital assets give households a choice as to how to hold their savings. For South Africans without the means to open offshore accounts, dollar-linked stablecoins held through a local exchange offer the simplest way to protect part of their savings against a weakening rand. Rules that restrict how such assets may be moved or held narrow their choices.Time to scrap exchange controls, not expand themMost Western democracies do not have comprehensive exchange controls of the kind the National Party government adopted in 1961, the ANC government has since retained, and the Regulations now seek to expand. By contrast, countries with similar controls include Cuba, China, Iran, Russia, Venezuela and Zimbabwe.As economist Chris Hart has pointed out: “There is only one purpose for capital controls – that is to shield bad policies. Countries with good policies have no need for capital controls.” Potential investors are well aware of this, which is why they prefer to invest in countries that do not constrain the repatriation of capital and the returns it has earned.South Africa cannot afford to give potential foreign investors still more reason to avoid it. Its limping economy urgently requires much more fixed investment into the factories, machines, ports, roads, and energy infrastructure needed to increase productive capacity, quicken the growth rate, and generate millions more jobs.The vital need to double fixed investmentFor many years, South Africa’s fixed investment rate has languished at around 15% of GDP a year. This is well below the rate (26% of GDP) that is the global norm and half the 30% rate the National Development Plan seeks to attain by 2030. In 2025 the country’s fixed investment rate was lower still at 13.7% of GDP. .Read more:.Treasury tightens grip on Crypto assets.Doubling the fixed investment rate from 13.7% of GDP to 27.4% of GDP – and preferably more – is a critically important need. However, the country’s domestic savings are too small to supply the capital required. Hence, the only way to obtain the necessary fixed investment is to attract the savings accumulated in other countries. But the Regulations – now compounded by the Manual – will make this still harder to achieve.The way forwardNeither the Regulations nor the Manual can be rectified by small changes to their wording. Rather, both are so flawed that they must simply be withdrawn. No amount of tweaking can bring them into line with guaranteed rights, the rule of law, and the doctrine of the separation of powers. If new rules of this kind are to be adopted at all, they must be enacted by Parliament. They must also be carefully crafted to avoid all the damaging consequences that are now so readily apparent..*Dr Anthea Jeffery holds law degrees from Wits, Cambridge and London universities, and is the Head of Policy Research at the IRR. She has authored 12 books, including Countdown to Socialism - The National Democratic Revolution in South Africa since 1994, People’s War: New Light on the Struggle for South Africa and BEE: Helping or Hurting? She has also written extensively on property rights, land reform, the mining sector, the proposed National Health Insurance (NHI) system, and a growth-focused alternative to BEE..This article was first published by Daily Friend and is republished with permission..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.

Anthea Jeffery: Treasury wants to put Bitcoin behind a border it can't find

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