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South Africa’s National Treasury has released a draft regulation that could force crypto holders to surrender their digital assets. The new draft allows officials to check phones for crypto apps and impose heavy penalties.
Violators could face a 1 million rand ($60,480) fine and up to five years in prison, raising serious concerns across the industry.
South Africa’s Draft Crypto Regulation 2026
The South African government’s Draft Capital Flow Management Regulations 2026 came into public view this week, and the reaction from the country’s financial and crypto industries has been immediate, sharp, and deeply alarmed.
The draft serves as the first wholesale replacement of South Africa’s exchange control framework in more than 60 years.
However, critics say the approach is outdated and not suitable for modern digital assets.
Farzam Ehsani, CEO of South Africa’s largest cryptocurrency exchange VALR, called the proposal “alarming” and warned it could push crypto businesses and investors out of the country. He believes the rules treat crypto as a threat instead of an opportunity.
Financial expert Steven Sidley also criticized the plan, saying it uses old methods designed for a different economic system.
What the New Crypto Draft Proposes
One of the biggest concerns is the idea of “compulsory surrender.” This means the government could force people to sell their crypto assets and convert them into local currency.
This is not just a tax, it is forced selling. Meanwhile, people may have to give up their crypto and accept local money at a rate set by the same authority.
Under Regulation 4, the draft also gives authorities strong powers to search and seize assets. Ehsani said that this would “presumably include searching your phone for crypto-related apps at all airports and points of exit.”
Breaking these rules could lead to a fine of around 1 million rand, approximately $60,480, and up to five years of imprisonment.
Lack of Clarity Raises More Concerns
Another issue is the lack of clear limits. The draft does not clearly explain what level of crypto holdings would trigger these rules. Instead, it leaves the decision to government officials.
This uncertainty has made industry leaders uneasy, as users may not know when they are breaking the law.
Experts warn that these strict rules could harm innovation and push investors to other countries with better regulations. It may also affect tourism, especially for tech entrepreneurs and digital workers.
