South Africa has proposed new rules that would limit certain offshore transfers of cryptocurrencies and stablecoins. The draft crypto asset manual for offshore transactions was published by the South African Reserve Bank’s (SARB’s) Financial Surveillance (FinSurv) division, and contains a mix of outright bans and reporting requirements. The consultation period runs until the end of September.
It bans companies from using cryptocurrencies (including stablecoins) for offshore receipts or payments and bans all inbound transfers from self-hosted wallets. Outbound transactions by individuals to self-hosted wallets are permitted, but are automatically classified as offshore transactions subject to exchange control limits, even if intended for domestic usage.
South African individuals can transfer crypto to or from abroad, but it is subject to usual exchange control restrictions and must be reported by the licensed domestic crypto asset services provider (CASP). The CASP can be authorized for different types of activities. The first is remittances which likely involve a stablecoin sandwich, given clients never touch the crypto and just send or receive rands. These are for small amounts up to R5,000 ($308) per day or R25,000 ($1,540) per month. The second category is more about asset transfers, within a discretionary R2 million ($123,000) annual limit or a higher R10 million limit for proven tax compliance.
The rules come at a time of change for South Africa’s foreign exchange controls, partly the result of cryptocurrency legal cases. Last year SARB lost a case, with the court ruling that cryptocurrencies are not covered by South Africa’s exchange control regulations because they are not “currencies”. The judge noted that the Treasury had ample time to revise the regulations. In a more recent case, a different judge strongly disagreed, but the Treasury is not leaving it up to the vagaries of the courts.
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