In a groundbreaking decision handed down on 15 May 2025 in Standard Bank of South Africa v South African Reserve Bank and Others [2025] ZAGPPHC 481, the Gauteng High Court ruled that cryptocurrencies do not fall within the ambit of South Africa’s Exchange Control Regulations (Excon Regulations). Though currently suspended pending an appeal, the judgment represents a watershed moment for crypto asset service providers (CASPs), fintech innovators, financial institutions, and regulators alike.
The court’s finding, being that cryptocurrencies are not “money” or “capital” for purposes of exchange control, unlocks temporary regulatory breathing room for crypto players. Yet, it also lays bare a regulatory vacuum that is unlikely to remain open for long.
Background: The Collision of Crypto and Traditional Finance
The dispute originated from the South African Reserve Bank’s (SARB) investigation into Leo Cash and Carry (Pty) Ltd (LCC), a wholesale trading company that used funds from South African bank accounts to purchase bitcoin on local exchanges, transferring the crypto to foreign exchanges. SARB, acting through its Financial Surveillance Department, declared over R26 million in funds held with Standard Bank and Nedbank as forfeited to the state, citing alleged contraventions of Excon Regulations 3(1)(c) and 10(1)(c).
These provisions prohibit, respectively:
- Payments to non-residents without Treasury approval, and
- The export of capital without permission.
Standard Bank challenged the forfeiture of R16.4 million it held in a pledged money market account, arguing that the Excon Regulations did not apply to crypto. The High Court agreed, at least in part.
Key Legal Findings: Cryptocurrency ≠ Currency or Capital
The court’s decision turned on several interpretative and constitutional principles:
1. Restrictive Interpretation of Criminalizing Legislation:
Drawing on Oilwell (Pty) Ltd v Protec International Ltd [2011] ZASCA 102, the court emphasized that Excon Regulations, which carry punitive consequences, must be interpreted narrowly. Cryptocurrency, being novel and unregulated, could not be forced into legacy definitions of “currency” or “capital” without legislative amendment.
2. Cryptocurrency Is Not Money or Legal Tender:
Bitcoin and similar assets, the court held, are not “currency” as contemplated by Regulation 3(1)(c) and cannot be deemed “capital” under Regulation 10(1)(c). These assets are decentralized, not backed by a central authority, and function outside the state-sanctioned financial ecosystem.
3. No Legislative Shortcut:
The court rejected SARB’s attempt to stretch existing definitions, pointing out that when government wanted to include intellectual property under “capital,” it had done so by formally amending the Regulations. The same path should apply to crypto.
4. Digital Wallets do not equal Bank Accounts:
Notably, the court observed that if crypto were equivalent to money, “then crypto wallets would be attached under Regulation 22B.” But crypto assets, being intangible and decentralized, elude traditional mechanisms of state seizure.
Immediate Implications for Crypto Asset Service Providers
Although the ruling is stayed pending appeal, its legal and market consequences are already rippling:
1. Regulatory Pause, Not Immunity:
CASPs may temporarily enjoy relief from SARB scrutiny under Excon Regulations, but the landscape remains fraught with uncertainty. The appeal, and eventual legislative reform, may restore oversight in due course.
2. Eased Compliance Pressures:
The judgment weakens SARB’s current tools for enforcing cross-border crypto transfer restrictions, creating breathing space for providers transacting internationally. However, it simultaneously raises reputational and operational risks for banks and financial institutions servicing crypto clients.
3.A Renewed Legislative Imperative:
The court highlighted a “regulatory vacuum,” echoing long-standing calls for bespoke digital asset legislation. The 2021 IFWG Position Paper and SARB’s own 2020 research foreshadowed this moment, and a swift regulatory amendment, akin to the post-Oilwell reforms, is likely on the horizon.
A Double-Edged Sword: Risk and Opportunity in the Vacuum
While CASPs and fintech’s may see this moment as an opening, the judgment creates new compliance and legal strategy challenges:
1. Capital Flight Concerns:
Without clear restrictions, businesses may attempt to “round trip” capital using crypto, moving value offshore via local crypto purchases and reconverting it abroad. This risks undermining South Africa’s broader financial stability objectives.
2. Banking Sector Dilemma:
Financial institutions must now navigate a compliance gap. While crypto transfers may fall outside exchange control, they remain subject to anti-money laundering (AML), counter-terrorism financing (CTF), and prudential risk management requirements under laws like FICA and FAIS.
3. Securitization and Insolvency Risks:
The court’s nuanced treatment of security rights and bank standing, in particular, its analysis of pledge, cession, and the principle of commixtio, should prompt CASPs to revisit how they structure and collateralize crypto holdings in financing or insolvency contexts.
Regulatory Recommendations: What Crypto Providers Should Do Now
Pending the appeal or an inevitable statutory overhaul, market participants should:
1. Maintain Strong AML/FICA Compliance:
Excon relief does not absolve other legal duties. KYC, transaction monitoring, and source-of-funds verifications remain essential.
2. Prepare for Imminent Legal Reform:
Providers should anticipate that crypto will soon be formally included in the Excon regime. Preemptive alignment with global best practices (e.g., FATF’s Travel Rule) may mitigate transitional risk.
3. Reassess Contractual and Security Arrangements:
Lenders and FinTech’s should revisit their treatment of crypto in lending, pledge, and liquidation scenarios, incorporating the court’s treatment of ownership rights in digital assets.
4. Engage with Regulators and Industry Bodies:
The door is open for industry-led engagement to shape the next iteration of exchange control law. Participation in public comment processes will be key to avoiding overbroad or counterproductive regulatory approaches.
Conclusion: A Defining Moment in South African Financial Law
The Standard Bank v SARB judgment is more than a technical ruling: it is a legal and regulatory pivot point in South Africa’s digital asset journey. While the court has momentarily lifted the Excon curtain from cryptocurrencies, it has also made clear that a new act, crafted for a digital age, must follow swiftly.
Until then, crypto asset service providers must walk a fine line: operating within the current relief, but preparing for a future in which digital assets will no longer be exempt from the rigors of capital control.
Written by Kerri Stewart, Attorney, SchoemanLaw Inc
