South African High Court Weighs In: Is Crypto Foreign Currency or Capital?

A High Court judgment[1], handed down on 15 May 2025, dealt with, inter alia, whether crypto currency constituted foreign currency and/or capital for purposes of South Africa’s Exchange Control Regulations, 1961.

Background

The background facts are summarised below:

• Leo Cash and Carry ("LCC"), a wholesale business, approached Standard Bank to open a business bank account in August 2019;
• LCC obtained a R40 million overdraft facility from Standard Bank in January 2020 on the basis that LCC pledge and cede, inter alia, its money market account with a R15 million balance in favour of Standard Bank (as security for the overdraft facility) – which was done on 24 February 2020;
• on 28 February 2020, Standard Bank received an e-mail from the Financial Surveillance Department of the South African Reserve Bank (“SARB”) informing Standard Bank that a hold be placed on LCC’s current and money market accounts. This was due to suspected exchange control contraventions (pursuant to SARB’s investigation, into inter alia LCC’s cryptocurrency transactions, which commenced in July 2019 and which was unknown to Standard Bank);
• LCC had acquired cryptocurrencies (including Bitcoin) on a cryptocurrency exchange and transferred same to foreign cryptocurrency exchanges;
• Standard Bank placed a hold on LCC’s accounts in compliance with SARB’s instructions (which was then lifted in March 2020);
• SARB instructed Standard Bank to monitor the LCC’s account;
• having discovered certain fraud, Standard Bank instituted a liquidation application against LCC in September 2021 (an order was granted in December 2021);
• on 22 February 2023, the Deputy Governor of the Prudential Cluster of the South African Reserve Bank took a decision to declare forfeited to the state, inter alia, an amount of R16.4 million held with Standard Bank together with interest thereon;
• the forfeiture order was published in the Government Gazette on 24 February 2023.

Issue

At issue between Standard Bank and the SARB, in so far as is relevant to this article[2], was whether Standard Bank was entitled to an order setting aside forfeiture of the amount of R16.4 million together with interest thereon.

Submissions by the parties

Standard Bank submissions included the following:

• it acquired the rights to the R16.4 million because of the pledge and cession (following an overdraft agreement concluded in the ordinary course of business and without knowledge of any exchange control contraventions). This submission was based upon  a provision in the Currency and Exchanges Act, 1933 that, in the case of a person other than an offender, no money shall be blocked, attached, forfeited and disposed of if such money was acquired by such person bona fide for reasonable consideration as a result of a transaction in the ordinary course of business and not in contravention of the regulations;
• there was no factual basis to conclude that the funds forfeited were involved in an exchange control contravention and therefore same could not be forfeited to the State;
• cryptocurrency does not constitute currency, money or legal tender in South Africa. Cryptocurrency was accordingly not a sum of money that was paid (as when one purchased cryptocurrency a block chain recorded one’s purchase on thousands of computers around the world). Standard Bank also questioned whether there was any evidence of a causa for the transactions and submitted that Regulation 3(1)(c) dealt with restrictions in respect of currency, gold, securities and the like (but not cryptocurrency);
• cryptocurrency did not constitute capital for purposes of Regulation 10(1)(c).

In summary Standard Bank submitted that the relevant Exchange Control Regulations did not apply to cryptocurrency (as a novel asset class) and as a consequence there existed a regulatory lacuna.[3]

The SARB contended that:

• the mere fact that Standard Bank may have been in possession or quasi possession of rights to the Standard Bank funds, did not constitute a bar to the blocking order and potential forfeiture (the incorporeal rights to the money in the Standard Bank account remained vested in LCC subject to limited conditional rights afforded by the pledge and cession);
• LCC contravened Regulation 3(1)(c) of the Exchange Control Regulations, 1961 as it provides that no person shall, without permission, make any payment to, or in favour, or on behalf of a person resident outside South Africa, or place any sum to the credit of such person. SARB contended, inter alia, that contravention of Regulation 3(1)(c) was not informed by the cause for the payment. Reliance was placed upon the definition of money which included foreign currency (being currency which is not legal tender in South Africa and included any other instrument for the payment of currency payable in a currency unit which is not legal tender in South Africa). In this regard, SARB contended that cryptocurrency is an instrument (note that the ordinary meaning of instrument includes a financial asset that can be bought or sold) that permitted payment in currency which is not legal tender in South Africa and it was common cause that cryptocurrency was exported from South Africa to a cryptocurrency-operating foreign jurisdiction. SARB contended that when rands are paid into a South African cryptocurrency wallet, the rand became cryptocurrency and the cryptocurrency enabled the holder to withdraw in a foreign currency a sum equivalent in value to that cryptocurrency. Cryptocurrency was therefore a form of payment (the judgment notes that Bitcoin was sent to Huobi Global);
• LCC contravened Regulation 10(1)(c) of the Exchange Control Regulations, 1961 as no person shall, except with permission, enter into any transaction whereby capital or any right to capital is directly or indirectly exported from South Africa. SARB contended that the Afrikaans text of the Exchange Control Regulations, 1961, which is equally authoritative, referred to ‘kapitaaluitvoer’ and this term referred to:

“transfer of money capital abroad” and

“long term provision of funds abroad”

This, contended SARB, accorded with the financial meaning of capital;

• LCC, in terms of the pledge and cession, transferred the power to realise the amount standing to the credit of LCC[4]. Standard Bank therefore did not have entitlement to the money standing to the credit of LCC.

High Court analysis

The High Court described cryptocurrency as a digital currency (not redeemable for gold/commodities) which is not backed by a central authority. Transactions are recorded on a blockchain (a decentralised ledger of transactions across a peer-to-peer network) which is not open to manipulation due to its algorithmic, cryptographic and distributed nature.

In determining the scope of Regulation 3(1)(c) the court held as follows:

• cryptocurrency is nothing more than codes on a digital ledger and exists anywhere and everywhere (cryptocurrency has a global nature);
• cryptocurrency is not money;
• the construction that cryptocurrency is money by examining the definition of money is strained and impractical (note that this finding was made despite money and foreign currency being defined in the Exchange Control Regulations);
• there is no room for an unnatural and fictitious reading into the Regulations to cover cryptocurrency.

With regard to Regulation 10(1)(c) the court held that cryptocurrency fell outside the ambit of capital (the ordinary meaning of which includes wealth in the form of money or other assets owned by a person or available for a purpose, money and possessions (especially a large amount of money used for producing more wealth, money that is used for investment).

Conclusion

We understand that the SARB has applied for leave to appeal the above decision. The decision is therefore not binding until the appeal process has been finalised.

Questions that remain, despite the judgment, are whether corporates can purchase foreign currency in order to purchase cryptocurrency abroad, and whether value can be round tripped out of and into South Africa using cryptocurrency. The judgment also did not squarely address whether a person can, without permission, enter into a transaction whereby capital (in the form of money) can be indirectly exported from South Africa through, for example, local purchase of cryptocurrency and a subsequent sale abroad.

Interestingly, the High Court stated the following in this regard:

“it is undeniable that the LCC was involved in a scheme, and/or used as a conduit to directly or indirectly export funds, foreign currency and capital from the Republic….

The terms of service of VALR stated that clients are only allowed to make payments from their fiat account to their cryptocurrency account.”  

SARB’s published policies indicate that:

• current exchange control policies do not expressly permit the purchase/transfer of foreign currency for the express purpose of purchasing cryptocurrency -  individuals may do so within their allowance limits for which they retain responsibility;
• the repatriation of value to South Africa through crypto assets is not permitted;
• non-residents who introduce crypto assets to South Africa for local sale may not be able to transfer the sale proceeds abroad.

We therefore encourage persons impacted by Exchange Control Regulations to seek professional advice before transacting.
 

[1] The Standard Bank of South Africa v The South African Reserve Bank and Others Case Number 047643/2023 [2025 ZAGPPHC 481]

[2] Money held with Nedbank is not discussed herein

[3] Counsel for Standard Bank relied upon an academic paper uploaded and relied upon by the SARB which concluded that “… the full legal ramification for a lack of legal regulation still remain unknown, and the cryptocurrencies are operating in a legal vacuum.”

[4] Clause 8.4 of Standard Bank’s terms and conditions provided that collateral maybe realised in part or in full if the counterparty is in default