VALR CEO Ehsani: Draft crypto rules risk driving flows offshore

Farzam Ehsani, co-founder and chief executive of VALR, criticised a joint draft crypto asset manual issued by South Africa’s National Treasury and the South African Reserve Bank. The document is open for public comment until Sept. 30 and proposes tighter controls on cross-border crypto transfers.

Under the draft, individual residents may transfer crypto abroad within existing foreign currency allowances, while corporate entities would be barred from cross-border crypto transactions. The framework would also treat certain inbound transfers from private, non-custodial wallets as non-permissible for local crypto asset service providers (CASPs). Regulators say the measures aim to improve monitoring of capital flows and reduce illicit activity.

Ehsani welcomed one change: the draft makes a reportable event occur when funds are withdrawn from a CASP rather than when assets are first purchased. He added the package remains harmful to licensed local operators and risks unintended consequences for employment, investment and innovation. In a written comment he argued that applying long-standing exchange controls to modern digital tools could be counterproductive.

He argued the restrictions create incentives that would undermine regulatory goals. Blocking legitimate corporate flows, including cross-border stablecoin payments that can settle faster, at lower cost and with greater transparency than some bank channels, could push businesses to unregulated foreign platforms or informal channels and reduce visibility for tax authorities and supervisors. “By prohibiting legitimate corporate activity through regulated providers, the proposed framework is likely to drive transactions underground or offshore,” Ehsani warned.

Ehsani criticised the draft’s treatment of self-custody wallets as impractical, saying classifying many non-custodial inbound transfers as non-permissible would push users away from licensed local platforms and conflict with the central bank’s aim of monitoring capital. He wrote that if South Africa keeps capital controls, they should be applied on a principled, fair and technology-neutral basis, with regulation focused on the movement of value and the risks involved rather than on which technologies can be used.

The remarks follow a formal challenge from another South African exchange that has called for parliament to rewrite the framework on similar grounds. Both exchanges are participating in the public consultation. Treasury and the central bank have said they will review stakeholder feedback and may refine the draft before any rules are finalised.

South Africa has operated exchange controls for decades to manage capital outflows. Regulators have increased scrutiny of the crypto sector as cross-border transfers become easier outside traditional banking channels. The draft manual represents a first comprehensive attempt by the National Treasury and the SARB to set rules for crypto asset movements and the responsibilities of CASPs.

Ehsani expressed hope that the consultation would produce a balanced regime that preserves the state’s ability to monitor flows while allowing a functioning local crypto industry. “We face a fundamental choice in South Africa: whether we are serious about overcoming our economic challenges, unlocking growth and becoming a globally competitive force, or whether our frameworks undermine those ambitions,” he wrote.