High Court Rules Cryptocurrency Falls Outside Exchange Control Definitions of ‘Foreign Currency’ and ‘Capital’

A judgment of the High Court, delivered on 15 May 2025, addressed whether cryptocurrency qualifies as “foreign currency” or “capital” under South Africa’s Exchange Control Regulations, 1961. The decision has significant implications for financial institutions, corporate traders, and the Reserve Bank’s enforcement powers.

Case Background

The dispute arose from events involving Leo Cash and Carry (“LCC”), a wholesale business:

In August 2019, LCC approached Standard Bank to open a business account.
By January 2020, Standard Bank granted LCC a R40 million overdraft facility, secured by a pledge and cession of several assets, including a money market account containing R15 million. The security was formally ceded on 24 February 2020.
Four days later, on 28 February 2020, the Financial Surveillance Department of the South African Reserve Bank (“SARB”) instructed Standard Bank to freeze LCC’s accounts. SARB had been investigating LCC’s cryptocurrency dealings since July 2019, an investigation unknown to the bank.
LCC had purchased cryptocurrencies such as Bitcoin locally and transferred them to offshore exchanges.
The account freeze was lifted in March 2020, but SARB directed Standard Bank to monitor LCC’s transactions.
In 2021, after uncovering fraudulent conduct, Standard Bank applied for LCC’s liquidation; an order was granted in December 2021.
On 22 February 2023, the Deputy Governor of the SARB’s Prudential Cluster ordered the forfeiture to the state of approximately R16.4 million in LCC’s Standard Bank accounts, plus interest. This forfeiture was gazetted on 24 February 2023.

Standard Bank challenged the forfeiture order, seeking to have it set aside.

Arguments Presented

Standard Bank’s Position

The bank relied on the Currency and Exchanges Act, 1933, which protects third parties acting in good faith. It argued that:

The funds had been ceded to it as security in the ordinary course of business, without knowledge of any exchange control breaches.
There was no evidence that the R16.4 million was linked to an exchange control contravention.
Cryptocurrency is not legal tender, currency, or “money” in South Africa. Purchasing cryptocurrency involves blockchain ledger entries, not payment of a monetary sum.
Exchange Control Regulations, specifically Regulations 3(1)(c) and 10(1)(c), refer to currency, gold, and securities, not cryptocurrency.
Cryptocurrency should not be considered “capital” for the purposes of the Regulations, revealing a regulatory gap.

SARB’s Position

The Reserve Bank countered that:

Possession or partial rights over funds via pledge and cession did not prevent a blocking or forfeiture order; ownership rights still resided with LCC.
LCC breached Regulation 3(1)(c), which prohibits making payments to or for the benefit of non-residents without approval. SARB claimed cryptocurrency was an “instrument” enabling payment in foreign currency, as it could be converted abroad into non-South African currency.
LCC also contravened Regulation 10(1)(c), which prohibits the unauthorised export of capital or rights to capital. Referring to the Afrikaans text (“kapitaaluitvoer”), SARB argued that this encompasses transferring money abroad or making long-term funds available outside the country.
The pledged funds in LCC’s account were still effectively LCC’s, and thus could be forfeited.

High Court’s Findings

The Court described cryptocurrency as a decentralised digital asset recorded on a blockchain, outside the control of any central authority and not redeemable for commodities. In analysing the Regulations, it found:

Cryptocurrency consists of encrypted digital codes on a distributed ledger and has no fixed location; it exists everywhere and nowhere.
It does not qualify as “money” under the ordinary meaning or within the definitions in the Regulations.
Attempting to treat cryptocurrency as “money” for regulatory purposes would be an artificial and unjustified interpretation.
Cryptocurrency also does not fit the ordinary meaning of “capital” as contemplated in Regulation 10(1)(c), which relates to money or assets used to create wealth or generate investment returns.

Status and Implications

SARB has applied for leave to appeal, meaning the judgment is not yet final. Until the appellate process concludes, the position remains unsettled.

The ruling leaves unanswered questions, including:

Can South African corporates purchase foreign currency for the express purpose of acquiring cryptocurrency abroad?
Can value be “round-tripped” out of and back into South Africa through crypto transactions?
Does indirect capital export occur when cryptocurrency is purchased locally and sold on a foreign exchange?

The Court did acknowledge evidence that LCC had been used as a conduit to move funds offshore via crypto transactions. SARB’s published policy positions currently state that:

Buying foreign currency specifically to purchase cryptocurrency is not permitted outside existing foreign allowance limits for individuals.
Repatriating value to South Africa via crypto assets is prohibited.
Non-residents selling crypto in South Africa may be restricted from transferring sale proceeds abroad.

Key Takeaway

Until higher courts rule on the matter, businesses and individuals engaging in cryptocurrency transactions that may intersect with exchange control laws should seek expert legal and regulatory advice. The boundaries between digital asset flows and existing currency and capital controls remain under scrutiny and potentially subject to change.