Case Note: The Standard Bank of South Africa v The South African Reserve Bank

Case Background

This High Court judgment from the Gauteng Division, Pretoria, addresses the applicability of South Africa’s Exchange Control Regulations (“Excon“) to cryptocurrency transactions. The case centers on forfeiture orders issued by the South African Reserve Bank (“SARB”) against funds held in accounts related to cryptocurrency trading activities of Leo Cash and Carry Pty Ltd (“LCC”).

LCC was established in 2018 as a wholesale trading business in Rustenburg, it opened a business current account with Standard Bank in August 2019. In December 2019, LCC applied for and received approval for a ZAR 40,000,000 (Forty Million South African Rand) overdraft facility from Standard Bank. As collateral, Standard Bank required LCC to place funds in a money market account with a balance of ZAR 15,000,000 (Fifteen Million South African Rand).

In February 2020, SARB’s Financial Surveillance Department (“FinSurv”) instructed Standard Bank to place holds on LCC’s accounts due to suspected exchange control contraventions. FinSurv had been investigating cryptocurrency transactions by various entities including LCC since July 2019. The investigation revealed that LCC had acquired cryptocurrencies on a local exchange and transferred them to foreign cryptocurrency exchanges.

Following the investigation, SARB forfeited ZAR 16,404,700.27 (Sixteen Million Four Hundred Four Thousand Seven Hundred Rand and Twenty-Seven Cents) from LCC’s money market account with Standard Bank and ZAR 10 000 000 (Ten Million South African Rand) from LCC’s account with Nedbank. Standard Bank subsequently brought a review application to set aside the forfeiture orders.

Decision

The court’s analysis focused on two key questions:

1. Whether Standard Bank had standing to challenge both forfeiture orders? and;
2. Whether the Exchange Control Regulations apply to cryptocurrency transactions?

On the first question, the court determined that Standard Bank lacked standing (locus standi) to challenge the forfeiture of the ZAR 10,000,000 (Ten Million South African Rand) in the Nedbank account. The court noted that by Standard Bank’s own argument regarding commixtio (the mixing of money in bank accounts), the ZAR 10,000,000 (Ten Million South African Rand) deposited into Nedbank became Nedbank’s property, not Standard Bank’s therefore court held that Standard Bank does not have locus standi to challenge the ZAR 10 000 000 (Ten Million South African Rand) in Nedbank Limited.

On the substantive question of whether cryptocurrency transactions violated Excon, the court examined Regulations 3(1)(c) and 10(1)(c). These regulations restrict payments to persons outside South Africa and the export of capital from the Republic, respectively.

The court concluded that the current Excon, promulgated in 1961, are not “fit for purpose to deal with the machinations in the world of cryptocurrency“. The court emphasized that:

1. Cryptocurrency is neither currency nor legal tender in South Africa;
2. A restrictive interpretation is required for regulations creating criminal and administrative penalties; and
3. On any construction, cryptocurrency falls outside the ambit of “capital” under regulation 10(1)(c) of Excon.

The court noted SARB’s own acknowledgment of regulatory gaps, which highlighted the lack of a proper regulatory legal framework for cryptocurrencies, the absence of regulatory protection for cryptocurrency owners, and the difficulty in enforcing law enforcement actions.

In its final order, the court:

1. Dismissed Standard Bank’s application regarding the ZAR 10 000 000 (Ten Million South African Rand) held in Nedbank due to lack of standing; and
2. Set aside the forfeiture of ZAR 16,404,700.27 (Sixteen Million Four Hundred Four Thousand Seven Hundred Rand and Twenty-Seven Cents) held in Standard Bank’s money market account.

Legal Significance

The court explicitly recognized a regulatory lacuna regarding cryptocurrencies, stating that “a regulatory framework addressing cryptocurrency is long overdue“. The court drew a parallel with how intellectual property rights were specifically addressed in Excon, suggesting that cryptocurrencies similarly need dedicated legislative attention.

The ruling highlights the challenges of applying decades-old financial regulations to modern digital assets. By determining that the current Excon do not encompass cryptocurrency transactions, the court has effectively created a regulatory gap that can only be filled through legislative action.

The judgment also reinforces the principle that regulations creating criminal and administrative penalties require restrictive interpretation. This approach protects individuals and entities from being penalized under laws that do not clearly apply to their activities.

Furthermore, the case illustrates the tension between the need for financial regulation to protect national economic interests and the principle of legality in a constitutional democracy governed by the rule of law. The court emphasized that judges must respect the separation of powers and not engage in judicial legislation.

Comparative Perspective: South Africa and India

In May 2025, the Supreme Court of India questioned the central government’s delay in regulating cryptocurrencies, noting that taxing crypto profits at 30% implies de facto recognition. While hearing a plea related to a multi-state crypto fraud, the court stressed the need for expert consultation and regulatory oversight, rather than an outright ban. It flagged practical challenges courts face in crypto-related cases and asked the government to clarify its stance, with an updated report expected by July. The issue arises amid ongoing investigations linked to the Bitconnect Ponzi scheme and reflects broader global shifts in crypto policy.

The South African regulatory gap identified in this judgment mirrors similar challenges faced by the Reserve Bank of India (“RBI”) in regulating cryptocurrencies. Both central banks have grappled with applying traditional financial regulations to this novel asset class. Although RBI has maintained a firm and cautious stance on cryptocurrencies. It has consistently warned that private cryptocurrencies like Bitcoin and Ethereum have no underlying value and pose threats to macroeconomic and financial stability. In 2018, the RBI directed banks to stop dealing with crypto-related transactions. However, in a landmark decision in 2020, the Supreme Court of India overturned this banking ban, allowing crypto exchanges to function again.

The SARB’s position paper acknowledged several regulatory challenges that are equally relevant in the Indian context: lack of a proper regulatory legal framework, absence of regulatory protection for cryptocurrency owners, difficulty in enforcing law enforcement actions, and the absence of exchange regulations governing cryptocurrency transfers.

Like South Africa, India has struggled with defining the legal status of cryptocurrencies. The South African court’s emphasis on cryptocurrency being “neither currency nor a legal tender” echoes the RBI’s historical position. Both jurisdictions face the fundamental challenge of determining whether cryptocurrencies should be regulated as currencies, securities, commodities, or a new asset class entirely.

The South African court’s recognition that cryptocurrency has been “in existence for over 15 years” and requires “legislative attention” serves as a reminder that regulatory frameworks in many jurisdictions, including India, have not kept pace with technological innovation in the financial sector.

Similar to South Africa, in India, Foreign Exchange Management Act (“FEMA”) governs cross-border payments and foreign exchange with the aim to facilitate trade and maintain market stability. The enforcement agencies under FEMA have time and again flagged issues arising from virtual digital asset (“VDA”) transfers. However, the FEMA itself remains silent on its application to VDAs and while VDA-related foreign transactions are on the rise, their regulatory status under FEMA remains unclear. Some argue that FEMA, intended to regulate foreign exchange, should not apply to cross-border VDA transfers. Sections 3 and 4 restricting foreign exchange dealings to authorised persons (i.e. Banks) are often cited, but FEMA was enacted before VDAs existed and was never designed (or equipped) to regulate them. Applying FEMA to VDAs may therefore lead to legal inconsistencies and regulatory gaps.

The Government of India has also not banned cryptocurrencies outright but has chosen to regulate through taxation. In 2022, it imposed a 30% tax on gains from cryptocurrencies and a 1% TDS on all crypto trades. These tax measures led to a sharp drop in trading activity within India. Although a draft bill proposing a ban on private cryptocurrencies was listed in Parliament in 2021, it was never introduced. Currently, the government is reviewing its policy position due to changing global norms and the need for harmonized international regulation.

This judgment’s emphasis on the need for specific cryptocurrency regulations, rather than attempting to stretch existing regulations beyond their intended scope, offers valuable guidance for other jurisdictions, including India, as they develop their own regulatory approaches to digital assets.

The South African Court’s conclusion that “Exchange regulations do not govern the transfer of cryptocurrencies in and out of South Africa. Any cross-border exchange can therefore not be authorized by SARB” highlights a regulatory vulnerability that likely exists in many jurisdictions worldwide, including India, potentially enabling capital flight through cryptocurrency channels.

Conclusion

The Standard Bank case represents a significant judicial recognition of the regulatory challenges posed by cryptocurrencies. By ruling that South Africa’s Excon do not apply to cryptocurrency transactions, the court has highlighted an urgent need for legislative action to address this regulatory gap. This judgment serves as an important reference point for other jurisdictions facing similar challenges in adapting their financial regulatory frameworks to the digital age.