High Court Criticizes South African Reserve Bank over Cryptocurrency Regulations
In a recent ruling, a High Court judge in South Africa has criticized the South African Reserve Bank (SARB) for its reliance on antiquated exchange control regulations established during the apartheid era to oversee cryptocurrency transactions. Judge Mandlenkosi Motha expressed disbelief that the SARB continues to apply the Exchange Control Regulations (Excon) of 1961, which were originally designed to impede capital flight under a discriminatory regime, to modern digital financial technologies that have rapidly evolved over the past 15 years.
Legislative Framework Necessity
During the hearing, the judge pointed out that cryptocurrencies have existed long enough for the SARB to develop appropriate legislative measures rather than clinging to laws that are not suited for their regulation.
“It’s unacceptable for the SARB to remain complacent; it should not be said that they have been caught napping,”
the judge remarked, emphasizing the necessity for legislative frameworks that acknowledge the unique nature of cryptocurrencies, much like the recognition given to intellectual property within existing regulations.
The Case of Standard Bank
The judge’s comments emerged from a case involving Standard Bank, which was attempting to reclaim $2.28 million (about 41 million rand) from a client whose assets were seized by the SARB’s financial surveillance division, Finsurv. This seizure came after the bank’s client was found to have violated exchange control laws by purchasing bitcoins and moving assets to overseas platforms. Standard Bank contended that the Excon Act does not pertain to cryptocurrency, thus questioning the legitimacy of Finsurv’s allegations of violations of foreign exchange regulations based on the purchase and transfer of digital currencies.
Classification of Cryptocurrency
Additionally, Judge Motha challenged the classification of cryptocurrency as a form of money, arguing that it does not meet the criteria necessary for that designation.
“Cryptocurrency cannot be deemed as money,”
he explained, stating that interpretations of money which encompass foreign currency are often forced and unrealistic, further highlighting the need for regulatory evolution in response to technological advancements in finance.
