According to Farzam Ehsani, Co-founder and CEO of VALR, South Africa's proposed new regulatory framework for cross-border cryptocurrency transactions could seriously harm the domestic digital asset industry and push financial activity into the shadows if key provisions are not substantially revised.
Commenting on the joint draft guidance on crypto assets published by the National Treasury and the South African Reserve Bank (SARB), Ehsani warned that attempting to apply decades-old capital control measures to modern technology jeopardizes employment, local investment, and business innovation.
Acknowledging positive changes in the draft—specifically, that the reportable event occurs when funds are withdrawn from a Crypto Asset Service Provider (CASP) system, not upon the initial purchase of assets—Ehsani noted that the proposals still disadvantage licensed local operators.
"South Africa would benefit more from fully abolishing exchange controls while maintaining proper reporting, transparency, and regulatory oversight, rather than trying to adapt a half-century-old regulatory regime to modern technology and the digital economy," Ehsani said in an interview with Bitcoin.com News.
According to the draft rules, resident individuals are permitted to transfer cryptocurrency abroad within existing exchange quotas. However, this regulatory framework restricts legal entities from conducting cross-border crypto transactions and classifies a range of inbound transfers originating from private non-custodial self-hosted wallets as inadmissible for local CASPs.
Ehsani argues that these restrictions create undesirable incentives for both businesses and retail users. By blocking legitimate corporate transactions—particularly cross-border stablecoin payments that offer faster, cheaper, and more transparent settlement compared to outdated banking networks—these rules will undermine the very regulatory oversight the authorities seek.
"By prohibiting legitimate corporate activity through regulated providers, the proposed regulatory framework is likely to push transactions into the shadows or offshore," said Ehsani. "This will reduce the very transparency and control that the National Treasury and the South African Reserve Bank (SARB) aim to achieve, while simultaneously undermining employment, tax revenue, investment, innovation, and new enterprise creation."
Ehsani also raised concerns regarding self-hosted wallets, noting that deeming transactions from non-custodial wallets as inadmissible is neither practical nor sensible. He warned that such a restriction would push South African users to use foreign, unregulated exchanges instead of local licensed platforms, which runs counter to the central bank's goal of monitoring capital flows within the country.
"If South Africa chooses to retain capital flow controls, it should at least apply them on a principled, equitable, and technologically neutral basis," said Ehsani. "Regulation should monitor the movement of value and manage associated risks; it should not dictate which technologies individuals and companies can use."
The VALR co-founder's comments came nearly a month after another South African exchange, Luno, formally challenged the proposed capital flow rules. As reported by Bitcoin.com News, Luno—which has called on Parliament to revise the regulatory framework—argues that the government's current approach risks driving cryptocurrency activity underground and beyond the reach of domestic regulators and tax authorities.
The National Treasury and the South African Reserve Bank (SARB) have opened the draft crypto asset guidance for public comment until September 30. The authorities have emphasized that the draft guidelines are subject to refinement based on stakeholder feedback before final implementation.
Ehsani expressed optimism that the consultation process will lead to a more balanced regime. "South Africa faces a fundamental choice: either we are serious about overcoming our economic problems, unlocking growth, and becoming a globally competitive force, or our regulatory frameworks undermine these ambitions," he said.
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