South Africa Court Rules Digital Assets Free from Forex Controls: A New Loophole?

Pretoria, May 30, 2025 - A Pretoria High Court ruling has declared that digital assets like Bitcoin are not subject to South Africa’s foreign exchange controls, as they are neither currency nor capital. The decision stems from a legal battle between Standard Bank, Africa’s largest lender, the South African Reserve Bank (SARB), and Leo Cash & Carry (LCC), a now-insolvent firm. The SARB had seized over $1 million from an LCC account at Standard Bank, claiming the firm violated forex laws by purchasing $37 million in Bitcoin and transferring it abroad without authorization.

However, Judge M.P. Motha ruled in favor of Standard Bank, stating that digital assets do not fall under the country’s strict exchange control framework, opening a significant loophole for offshore transfers.

Details of the Ruling

Judge Motha’s ruling hinged on the definition of currency, asserting that digital assets are not money or legal tender in South Africa and thus are exempt from the Exchange Control Regulations. He emphasized that interpreting cryptocurrency as money, even under the broader definition of foreign currency, is impractical. The judge further clarified that digital assets fall outside the legal definition of capital, meaning their movement across borders does not breach South Africa’s forex laws.

This decision has major implications, as it allows South Africans to externalize unlimited amounts of digital assets without oversight. Wiehann Olivier from Forvis Mazars noted to local media that this creates a workaround for moving money offshore, a concern echoed by global law firm Baker McKenzie, which highlighted the ruling’s potential to undermine the country’s exchange control system.

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Implications and Regulatory Response

The ruling exposes a gap in South Africa’s regulatory framework, potentially enabling residents to bypass forex restrictions by converting funds into digital assets and transferring them abroad. Experts predict the SARB will act quickly to address this loophole, with Baker McKenzie suggesting amendments to the Exchange Control Regulations within the next 12 to 18 months. Olivier speculated that the central bank may not have been fully aware of this grey area, given its significance.

The decision aligns with the SARB’s stance that digital assets are not legal tender, a position shared by many global central banks, including Russia, where digital asset payments remain banned despite a pro-crypto stance. Recent web data shows South Africa’s digital asset market has grown, with trading volumes on local exchanges reaching $2.3 billion in Q1 2025, a 15% increase from the previous quarter, underscoring the urgency for regulatory clarity.

Did You Know?
South Africa was one of the first African nations to regulate digital assets, introducing a licensing framework for VASPs in 2023, which has attracted global crypto firms to the region.

Calls for Stronger Regulation

South Africa boasts Africa’s most advanced digital asset regulations, having licensed over 200 Virtual Asset Service Providers (VASPs). However, this ruling highlights persistent gaps in the framework. Judge Motha noted that digital assets, having existed for over 15 years, can no longer be considered a nascent sector, urging regulators to adapt. Desiree Reddy of Norton Rose Fulbright emphasized the need for legislative reform to provide clarity in this evolving space.

The ruling has sparked concern about potential misuse, reinforcing global narratives that digital assets can facilitate capital flight and criminal activity. Social media discussions reflect public unease, with many users calling for tighter controls to prevent abuse while others see the ruling as a boost for financial freedom in the digital asset space.