Have ever wondered whether you may freely send your cryptocurrency overseas? While this may commonly be practiced, it technically falls foul of South Africa’s Exchange Control Regulations (“the Regulations”), and although the South African Reserve Bank (“SARB”) currently has limited means to detect these offences, it is within the SARB’s prerogative to apply sanctions to offenders – which may include a fine and/or imprisonment for up to 5 years.
The Regulations prohibit the exportation of capital from the Republic without permission from the SARB, which grants this permission through Authorised Dealers, such as commercial banks. The Regulations define capital broadly and it includes any intellectual property right, whether registered or unregistered. While this definition may be wide enough to include certain types of type of crypto assets (including cryptocurrencies), Authorised Dealers do not at present have the means to properly process the cross-border flow crypto assets. The SARB has therefore made it clear that sending crypto assets abroad is simply not permitted.
It is the IFWG’s recommendation that crypto assets be included within the meaning of “capital” in the Regulations and that a “Balance of Payment” category be created specifically for crypto assets. This will allow Authorised Dealers to process crypto asset transactions abroad. These recommendations are not yet law, and cryptocurrency users should be cautious when sending their crypto assets abroad.
Advice issued by the SARB indicates that when crypto is being sent abroad, it needs to be liquidated here in South Africa first, sent abroad through an Authorised Dealer, and then converted back to crypto in the recipient jurisdiction. The Rand amount sent abroad through the Authorised Dealer will be deducted from the individual’s Single Discretionary Allowance/Foreign Capital Allowance. This process entirely defeats the appeal of cryptocurrency as a quick and cheap method of transacting, but until South Africa’s regulations regarding crypto assets are amended, users should ensure they comply with current regulations.
Contact us today if you have questions in connection with Exchange Control Regulations regarding crypto assets.
About the author
Megan started her articles with Dunsters in 2020 and is a graduate of the University of Cape Town (B.COM PPE, LLB). Megan is in the commercial team at Dunsters and enjoys working on drafting all kinds of contracts as may suit our clients’ needs. Her areas of interest lie broadly in the commercial sphere, with a more specialised focus on technology and the law. Megan also writes and oversees the editing of our insights and articles.
In her spare time Megan is Chairperson of the Cape Town Candidate Attorneys’ Association, loves to paint and prefers to spend her weekends outdoors. Cold-water swimming, running and hiking, she is keen on all the outdoor activities Cape Town has to offer.