At least three deals have been paused because of the proposed changes, according to people familiar with the transactions. The affected agreements include a large private-equity investment and other deals intended to support small-business capital formation and corporate treasury management.
Farzam Ehsani, co-founder and chief executive of cryptocurrency exchange VALR, has separately said the R2.2 billion total includes a proposed R1.6 billion investment by an international private-equity company, alongside two other transactions valued at R250 million and R350 million. He said founders involved in the negotiations had been told that investors were waiting for regulatory clarity before proceeding.
The uncertainty centres on draft Capital Flow Management Regulations and a separate draft Crypto Asset Manual for cross-border activities issued by National Treasury and the South African Reserve Bank. The authorities are seeking to replace and modernise the existing exchange-control framework while extending oversight to crypto-related cross-border flows.
Under the draft manual, crypto assets transferred between a domestic authorised crypto-asset service provider and an offshore provider, or from a domestic authorised provider to a non-custodial wallet, would trigger reporting requirements to the Reserve Bank’s Financial Surveillance Department.
The proposed approach would, at this stage, allow only individuals to externalise crypto assets through authorised service providers under existing personal foreign-investment allowances. Industry participants have raised concerns that the framework could restrict corporate uses of stablecoins and other digital assets in legitimate cross-border business.
South African companies operating elsewhere in Africa use stablecoins for purposes that can include repatriating profits and receiving dividends from subsidiaries, particularly where access to hard currency is constrained. Central-bank data show on-chain transactions involving Tether’s USDT across three of the country’s largest licensed cryptocurrency exchanges approached R27 billion in the year through April.
The Reserve Bank does not regard crypto assets as legal tender. It has also identified the expansion of global stablecoin activity as an area requiring close monitoring because of potential financial-stability and cross-border capital-flow risks.
National Treasury and the Reserve Bank say the proposed framework is intended to reduce regulatory arbitrage, improve monitoring of cross-border transactions and strengthen authorities’ ability to detect, deter and disrupt illicit financial flows. The measures are intended to complement oversight already exercised by the Financial Sector Conduct Authority, Financial Intelligence Centre and South African Revenue Service.
Authorities first published the draft Capital Flow Management Regulations for comment on April 17. The consultation deadline was later extended to June 30 after stakeholders sought additional time, with officials acknowledging that much of the public concern focused on the treatment, possession and trading of crypto assets, particularly cross-border transactions.
A more detailed draft Crypto Asset Manual was released on August 3. National Treasury and the Reserve Bank said at the time that it had not yet incorporated submissions made on the earlier regulations because of the timing of its release and the volume of comments received.
The authorities have stressed that both documents remain drafts and may be revised following public submissions and further engagement. The Reserve Bank has said regulators are continuing discussions on several aspects of crypto assets, including the treatment of stablecoins, while monitoring domestic and international developments.
Industry executives argue that rules perceived as too restrictive could push some transactions offshore, reduce investment in local digital-asset businesses and weaken the tax base associated with the sector. Those concerns remain claims from market participants rather than established outcomes, since the final regulations have not been adopted.
The proposed regime is also being developed against an existing exchange-control framework under which cross-border transfers explicitly intended to purchase crypto assets are restricted. The Reserve Bank currently states that crypto assets are not guaranteed or backed by it and that users bear the risks associated with their price movements.
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