Valr CEO warns draft SA rules could force crypto surrender

Valr CEO Farzam Ehsani warned that South Africa’s Draft Capital Flow Management Regulations 2026 could require holders to surrender crypto assets, give authorities broad search-and-seize powers and expose violators to fines and prison.

The draft, published by the National Treasury as a replacement for exchange control rules dating to 1961, proposes a wholesale update of the country’s capital flow framework to address digital assets. Industry submissions from exchange operators and financial academics oppose parts of the text, saying the rules apply an older legal approach to blockchain-based assets.

Two provisions in the draft have drawn particular concern. Regulation 8 would allow authorities to mandate compulsory surrender of crypto assets for conversion into South African rand at market rates. Regulation 4 would expand enforcement powers to search for and seize assets. The draft leaves numeric thresholds and reporting triggers unspecified, delegating those decisions to ministerial determination.

Ehsani raised practical enforcement concerns, noting that expanded powers could extend to searching electronic devices at ports of entry and exit. He warned that unclear thresholds and broad seizure authority could criminalize routine digital-asset ownership. In a formal submission he questioned how tokens denominated in rand but issued on blockchains would be treated if all crypto assets are classified as foreign property.

Steven Sidley, a financial commentator and professor at the University of Johannesburg, argued in his submission that the regulations treat crypto as a problem to be controlled rather than a technology to be responsibly integrated. Sidley pointed to peers that have adopted less restrictive approaches to digital assets.

Stakeholders noted the penalty framework in the draft could include fines up to 1 million rand and imprisonment for up to five years for breaches. Industry participants say the combination of surrender powers, expanded search authority and steep penalties could affect travel and business decisions by international entrepreneurs, investors and remote workers.

Since the Treasury released the draft, cryptocurrency firms, academics and some political figures have submitted objections. Industry sources say there are plans to create a foundation next year to seek legal challenges and push for clearer, more technology-neutral rules.

The National Treasury framed the draft as an update to a control regime designed for an earlier monetary system, aimed at strengthening oversight of cross-border value movement and preventing illicit finance. Supporters of the draft argue stronger tools are needed to monitor capital flows in a digital era. Opponents request explicit definitions of domestic versus foreign crypto assets, published numeric thresholds for reporting and surrender, and regulatory language that does not single out blockchain-based assets for different treatment.