The recent judgment in Standard Bank v South African Reserve Bank addresses a long-standing debate in South African law: namely, whether cryptocurrencies constitute "capital" for purposes of Regulation 10(1)(c) of the Exchange Control Regulations, issued in terms of section 9 of the Currency and Exchanges Act No. 9 of 1933 ("the Regulations").
The question was brought before the court by the Standard Bank of South Africa Limited ("Standard Bank"), challenging the South African Reserve Bank's ("SARB's") forfeiture of funds linked to cryptocurrency transactions initiated by Leo Cash and Carry (Pty) Ltd ("LCC"). Standard Bank, a secured creditor of LLC, argued, amongst other things, that the forfeiture was not justified as cryptocurrency should not be regarded as a form of capital for the purposes of the exchange control regime.
The court ultimately found that cryptocurrencies do not fall within the definitions of "money" or "capital" as contemplated in the Regulations.
In this regard, Motha, J held as follows:
"To me, on any construction, much less on a restrictive interpretation, cryptocurrency falls outside the ambit of capital under Reg 10(1)(c). I agree with the counsel for the applicant that a regulatory framework addressing cryptocurrency is long overdue. In the same way, intellectual property rights had a niche carved for them in Excon, cryptocurrencies need some legislative attention" (own emphasis).
As a result, the SARB's forfeiture of the relevant funds was set aside.
This decision serves as welcome guidance for South African residents on the current status of cryptocurrencies in the context of Regulation 10(1)(c). However, it's possible that amendments to the Regulations may follow (please see our previous article here). Therefore, it is important to consider the direction of crypto asset regulation.
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