To understand how Treasury and the Reserve Bankâs new draft crypto regulations fit into South Africaâs currency framework, know this: they only replace a single piece of the puzzle.

These draft regulations do not rewrite the Currency and Exchanges Act of 1933. Instead, they are being introduced under Section 9(1) of that Act, entirely replacing the outdated 1961 Exchange Control Regulations with the Capital Flow Management Regulations of 2026.

So the draft Crypto Asset Manual â which was unleashed on the unsuspecting public on Monday, 3 August â acts as a practical cross-border implementation guide to complement these regulations.

Strap in because yes, weâre talking about crypto and democracy.

A serious plot hole

The regulations propose strict limits on transactions above a certain value. Crucially, however, the actual monetary value of this threshold is left entirely blank in the draft text, to be deferred to future gazettes.

This makes it impossible to fully assess the real-world economic impact and has fuelled a litany of libertarian-flavoured LinkedIn posts.

Why? Because above this undefined threshold, transactions (read: buying groceries or electricity) cannot occur directly between individuals or merchants â they must go through a licensed crypto asset service provider (Casp).

It is reasonable to assume that the CEOs of these Casps would be in favour of these regulations. However, if youâve followed the drama so far, you would know that is a foolish response.

Farzam Ehsani, co-founder and CEO of VALR, emerged on social media as a major voice of dissent regarding the draft manual. He wrote:

âWhile I am encouraged by the media statementâs acknowledgement that the draft Regulations and Crypto Asset Manual remain subject to refinement following public comments and stakeholder engagement â and that the draft Manual now treats withdrawal from a Casp, rather than the purchase of a crypto asset, as the reportable transaction â there remain significant concerns that will need to be addressed.â

Ehsani argues that South Africa would be better served by abolishing exchange controls entirely and preserving reporting, transparency and surveillance, rather than retrofitting a âhalf-century-old regulatory regimeâ onto modern technology.

He claims that if capital controls are kept, they must be technology-neutral â regulating the movement of value, not dictating the specific technology that individuals and businesses can use.

The post also contains a bold assertion that the proposed framework is highly prejudicial to licensed Casps and risks destroying jobs, tax revenue, local investment, and innovation by restricting legitimate business activity. He makes a good point that banning local Casps from interacting with self-custody wallets is impractical and will force South Africans to transact with unregulated offshore exchanges rather than local, licensed Casps.

Unintended intertextuality

Ehsaniâs objections are fully justified when you consider his position as CEO of an exchange first. VALRâs business model relies on transaction volumes, fees and user interaction.

By labelling transactions with self-custody wallets as ânon-permissible,â the draft regulations directly sever local exchanges from a main artery of the global Web3 ecosystem. Users will bypass VALR and other local exchanges to transact directly on international platforms or self-custody rails.

Prohibiting corporate entities from using crypto for low-cost, cross-border treasury management and settlement replaces cheap, automated rails with expensive, traditional bank-driven processes. This does create headaches and friction for international investment, but also deprives local Casps of lucrative institutional client fees.

Ehsaniâs rhetoric on âtechnology neutralityâ is a brave mask for a legitimate fear that the regulations entrench legacy systems (read: the traditional banking sector) by keeping corporate entities tied to TradFi.

Yet his monthslong crusade to abolish exchange controls highlights the single most fascinating dilemma this regulatory experiment poses for the ANC-led government.

South Africaâs exchange controls were first tightened heavily in 1961 following the Sharpeville massacre, and again in 1985 in response to massive political crises, international disinvestment, boycotts and capital flight. In both instances, the controls were a reactive, desperate attempt to cushion the economy from capital flight.

With this context in mind, the 2026 draft regulations can be recognised as replicating this pattern.

Faced with a modern digital asset landscape that naturally facilitates capital movement, the Treasury is using a section of a 93-year-old law (the 1933 Act) to build digital walls to defend the rand.

A narrative twist

The 1985 crisis birthed the financial rand, a dual exchange rate system designed to trap capital inside South Africa by isolating non-resident capital flows.

In its current form, the 2026 draft manual creates a modern digital equivalent. By restricting outward crypto transfers and labelling inward transfers from self-custody wallets as non-permissible, the Treasury is carving out a fenced-in, domestic-only crypto market.

This artificial isolation of domestic digital assets from the global decentralised network closely mirrors the dual-rand isolation of the apartheid era â especially in the stablecoin and digital rand era.

Since 1994, South Africaâs official policy has been one of gradual liberalisation. This process saw the abolition of the financial rand (and a commitment to abolishing exchange controls) in 1995, the easing of corporate loop restrictions, and the elimination of blocked accounts for emigrants in 2021.

The new manual represents a significant step backwards from this trajectory.

Instead of moving towards a risk-based capital management framework in which investors can do anything except what is explicitly banned, the draft micro-manages specific transactions, mandates 30-day asset declarations, and extends state power into compulsory asset purchases.

This expands, rather than dissolves, the exchange control bureaucracy.

But this is 2026, and regulators are responding to real-world capital flight. The Treasuryâs desire to manage that is legally and economically understandable, given the vulnerability of the rand.

But by ignoring the borderless, decentralised reality of crypto assets and penalising local, regulated platforms, the draft manual risks repeating the historical mistakes of aggressive currency policing: driving capital into the shadows, killing local innovation, and leaving the state with less visibility and control than before.

What we can do is comment and wait for the next draft. DM