- South Africa’s High Court ruled that cryptocurrencies do not fall under current exchange control laws.
- The court decided that cryptocurrency is neither “money” nor “capital” by the definitions in national legislation.
- Standard Bank won its case against the South African Reserve Bank after $1 million in client funds were seized due to offshore Bitcoin purchases.
- The ruling could lead to increased cryptocurrency activity in South Africa until new regulations are set.
- The judge noted that lawmakers have had over 15 years to update laws to address cryptocurrencies.
On a recent ruling, the South African High Court determined that cryptocurrencies are not regulated by the country’s existing exchange control laws. The decision was made in a case involving Standard Bank and the South African Reserve Bank after the central bank seized $1 million from a client’s account. The seizure followed that client’s offshore Bitcoin transactions.
According to court records, the client, Leo Cash and Carry, was insolvent and had purchased $37 million in Bitcoin in 2019, transferring it outside South Africa. The central bank argued these actions violated exchange control regulations and claimed forfeiture over the funds held at Standard Bank.
The judge ruled that, under South African law, cryptocurrency is neither “money” nor “capital.” In the judgment, the court stated, “Cryptocurrency is not money.” The judge referenced statements from the reserve bank highlighting that cryptocurrencies are digital codes recorded on a ledger, existing globally. Past legal cases regarding intellectual property and capital controls were also cited, showing a history of narrow legal interpretations unless laws are specifically amended.
The decision emphasized that the country’s exchange control legislation gives broad forfeiture powers to the central bank. Therefore, the court explained those powers must be interpreted strictly and not extended to areas not clearly included by law. The judge observed there has been sufficient time for lawmakers to update the legislation since “cryptocurrency has been in existence for over 15 years.”
Experts believe that this ruling may temporarily increase demand for cryptocurrency in South Africa until new rules are drafted. If more citizens choose to buy cryptocurrency and send funds abroad, local banks could see an outflow of deposits. As the article noted, there may be a short-term premium on Bitcoin prices in the country if demand spikes suddenly.
A full discussion of the case can be found in this Linkedin post.
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