Last week the South African High Court ruled that cryptocurrencies are not subject to the country’s exchange controls. The International Monetary Fund (IMF) has long argued that many people use cryptocurrencies to circumvent capital controls in emerging market economies because they can be transferred peer to peer. It is worried this could destabilize those economies if there is a flight of capital. In the South African case, the court ruled that cryptocurrency could neither be classified as ‘money’ or ‘capital’ under South Africa’s exchange control legislation.
Standard Bank sued the South African Reserve Bank (SARB) and others because the central bank claimed forfeiture over R16.4 million ($1m) held in a Standard Bank account where the client, Leo Cash and Carry, was insolvent and the bank had a lien over the funds. The central bank seized the funds because Leo Cash and Carry had bought R556 million ($37m) of Bitcoin in 2019 and transferred it offshore.
SARB lost its case because the Judge said the exchange control legislation had to be interpreted narrowly given the central bank’s extensive powers of forfeiture.
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