South Africa’s proposed framework for cross-border crypto transactions could damage the country’s digital asset sector and undermine the oversight regulators want, according to VALR co-founder and CEO Farzam Ehsani.
Ehsani was commenting on a joint draft crypto asset manual issued by the National Treasury and the South African Reserve Bank. He said the proposals, unless significantly revised, risk hurting local investment, jobs, and innovation while sending capital and crypto activity offshore or into less visible channels.
Concerns over capital-control approach
Ehsani argued that the draft tries to fit modern digital assets into an exchange-control system designed decades ago. In his view, that approach is unfair to licensed local crypto businesses and could weaken the domestic market rather than improve supervision.
He said South Africa would be better served by removing exchange controls while keeping reporting, transparency, and regulatory surveillance in place. Even so, he acknowledged one change in the draft that he viewed positively: a reportable event would be triggered when funds are withdrawn from a crypto asset service provider, rather than when the crypto asset is first bought.
What the draft would allow and restrict
Under the proposal, individual residents would be allowed to transfer crypto offshore within their existing foreign currency allowances. At the same time, the framework would restrict companies from carrying out cross-border crypto transactions.
The draft also treats certain inbound transfers from private, non-custodial self-custody wallets as non-permissible for local crypto asset service providers. Ehsani said those provisions would disadvantage regulated domestic operators and create incentives for users to move activity away from the local licensed market.
Risk of driving activity out of view
A central part of Ehsani’s criticism is that the rules could produce the opposite of their intended effect. He said blocking legitimate business use of regulated crypto channels, including cross-border stablecoin payments, could push transactions underground or toward offshore venues.
According to Ehsani, that would reduce visibility for the National Treasury and the SARB rather than improve it. He said the result could also weigh on employment, tax revenue, investment, innovation, and new business formation.
He raised a similar objection to the treatment of self-custody wallets, arguing that classifying such transfers as non-permissible is impractical and could steer South African users toward foreign, unregulated exchanges instead of licensed local platforms.
Industry pushback and consultation timeline
Ehsani’s intervention follows earlier criticism from another South African exchange, Luno, which formally challenged the proposed capital-flow rules nearly a month earlier. Luno has urged parliament to rewrite the framework, arguing that the current approach could drive crypto activity beyond the reach of domestic regulators and tax authorities.
For now, the draft manual remains open for public comment until Sept. 30. The National Treasury and the SARB have said the guidelines are still subject to refinement after stakeholder engagement and before any final implementation.
Ehsani said he remains hopeful the consultation process can produce a more balanced regime, while maintaining that any retained capital controls should be applied in a fair, principled, and technology-neutral way.
Source: news.bitcoin.com