VALR CEO Warns South Africa’s Proposed Crypto Rules Could Drive Users and Businesses Offshore
VALR co-founder and CEO Farzam Ehsani has warned that South Africa’s proposed rules for cross-border cryptocurrency transactions could have the opposite effect from what regulators intend, potentially pushing legitimate users and businesses toward offshore platforms and reducing regulatory visibility.
His criticism follows the publication of South Africa’s Draft Crypto Asset Manual for Cross-Border Activities, released by the National Treasury and South African Reserve Bank on August 3, 2026.
The official SARB statement on the proposed framework says the rules are intended to strengthen oversight of cross-border financial activity, reduce opportunities for regulatory arbitrage and improve the ability of the Financial Surveillance Department, or FinSurv, to detect and disrupt illicit financial flows.
Ehsani agrees that crypto transactions should be subject to appropriate reporting and oversight. His objection is to how the proposed framework attempts to achieve that goal.
According to TechCentral’s reporting on VALR’s response, Ehsani believes preventing legitimate corporate crypto transactions through licensed South African providers could drive that activity “underground or offshore”, leaving regulators with less visibility rather than more.
The debate could have significant consequences not only for cryptocurrency exchanges but also for South African businesses looking at stablecoins as a way to make international payments.
What South Africa Is Proposing
The proposed Crypto Asset Manual is part of a much broader overhaul of South Africa’s capital-flow management regime.
Under the draft, a crypto transaction becomes cross-border when assets move between a domestic authorised Crypto Asset Service Provider, or CASP, and an offshore provider, or when crypto is transferred from a domestic authorised CASP into a non-custodial wallet.
Those transactions would have to be reported to FinSurv.
The South African Reserve Bank’s joint statement says that, at least initially, only individuals would be permitted to externalise crypto through authorised providers using their existing Single Discretionary Allowance or Foreign Capital Allowance.
That distinction between individuals and companies is at the centre of VALR’s objection.
The government’s own Draft Crypto Asset Manual classifies a transfer by a resident individual from a domestic authorised CASP to an offshore CASP or the individual’s non-custodial wallet as an export of capital that can be reported.
The same table, however, identifies such transactions as non-permissible for South African entities.
In practical terms, an individual could potentially use an authorised route to transfer crypto abroad within the relevant allowances, while a South African company would not have the same general permission.
VALR Says Businesses Could Simply Move Elsewhere
Ehsani argues that preventing companies from using locally regulated crypto providers for legitimate cross-border transactions will not necessarily stop the transactions.
Instead, businesses that genuinely need stablecoins or other digital assets for international settlement may look for alternative routes.
In comments reported by TechCentral, Ehsani argued that restricting legitimate corporate activity through regulated providers risks moving transactions offshore while weakening employment, investment, tax revenue and innovation within South Africa.
That creates a potential regulatory paradox.
National Treasury and SARB want cross-border crypto activity to become more visible.
But if companies cannot perform those transactions through licensed local platforms such as VALR or Luno, some may instead establish relationships with foreign service providers.
Those offshore providers may fall outside the direct supervision of South African regulators.
From VALR’s perspective, keeping legitimate activity inside regulated South African companies could provide authorities with better reporting and transaction visibility than forcing the activity elsewhere.
Stablecoin Payments Are a Major Point of Disagreement
The rules could be particularly important for stablecoins such as USDT and USDC.
Unlike Bitcoin, which is frequently treated as an investment or store of value, dollar-backed stablecoins are increasingly being used as settlement tools.
A South African software company might invoice an international customer in USDC.
An importer might want to pay an overseas supplier using USDT.
A business with contractors in several countries might use stablecoins to make international payments without relying entirely on traditional correspondent banking networks.
Under the current draft, the ability of South African companies to use locally regulated crypto providers for such transactions could be severely limited.
Ehsani told TechCentral that regulation should address the movement of value and the risks associated with it, rather than determining which technology businesses are permitted to use.
Luno has raised similar concerns.
Marius Reitz, Luno’s general manager for Africa and Europe, told MyBroadband that the proposal would effectively prevent South African companies from using stablecoins for cross-border commercial payments, supply-chain settlement and international trade.
The objections therefore extend beyond exchanges protecting their existing trading businesses.
The question is whether South African companies should be able to use blockchain-based payment infrastructure for legitimate international transactions under a regulated reporting framework.
A Simple Example
Consider a South African technology company that provides services to a customer in the United States.
The customer wants to pay a $20,000 invoice using USDC.
Under a regulatory system that permits corporate stablecoin settlement, the South African company could potentially receive the USDC through a licensed domestic exchange.
That provider could identify the company, verify the transaction, conduct anti-money laundering checks and report the cross-border flow to regulators.
Under the proposed framework, however, the transaction could be non-permissible because the recipient is a South African entity rather than an individual.
The company might then ask its customer to make the payment through traditional banking infrastructure.
But another possibility is that businesses interested in stablecoin settlement simply begin using offshore corporate structures, foreign exchanges or other platforms outside the local regulated environment.
It is that second outcome that concerns VALR.
Self-Custody Is Another Major Issue
Ehsani is also challenging the proposed treatment of non-custodial wallets.
Self-custody means that a person controls the private keys required to access their cryptocurrency rather than leaving those keys with an exchange.
Hardware wallets such as Ledger, Trezor and Coldcard are common examples, although self-custody can also be achieved through software wallets.
The proposed manual allows a resident individual to transfer crypto from a domestic authorised CASP to the individual’s non-custodial wallet, with the transaction treated as a reportable outward capital flow.
The problem appears when crypto moves in the opposite direction.
The government’s draft transaction table says transfers originating from non-custodial wallets and entering domestic authorised CASPs would be considered non-permissible.
That could create an unusual situation.
A South African may be able to buy Bitcoin on a regulated local platform and withdraw it into self-custody.
But returning that Bitcoin from the private wallet to a South African CASP could become problematic under the current proposal.
Why VALR Thinks This Could Help Offshore Exchanges
Ehsani argues that this treatment creates the wrong incentive.
If a person holds Bitcoin in self-custody but cannot easily return it to a licensed South African exchange, that person may simply open an account with an offshore exchange willing to accept the deposit.
Ehsani told MyBroadband that the treatment of self-custody wallets requires significant reconsideration because it could encourage South Africans to transact through offshore exchanges rather than regulated domestic CASPs.
That would create an unintended competitive advantage for foreign exchanges.
South African providers must comply with local licensing, customer identification and anti-money laundering requirements.
But if regulation makes it harder for self-custody users to transact with those providers, customers may migrate toward companies outside the local regulatory perimeter.
This is the central argument behind Ehsani’s warning that the rules could reduce oversight rather than strengthen it.
South Africa Is Not Banning Crypto Ownership
The debate requires an important distinction.
South Africa is not proposing to ban cryptocurrency ownership.
Nor does the draft automatically prohibit individuals from using self-custody wallets.
The focus is on how crypto assets move into and out of the regulated South African financial environment and how those movements should be treated under the country’s capital-flow regime.
The SARB’s official explanation of the draft says a cross-border trigger occurs when crypto moves between a domestic authorised provider and an offshore CASP, or when it leaves a domestic CASP for a non-custodial wallet.
The controversy is therefore less about whether people can own Bitcoin and more about which transactions regulated South African providers will be permitted to facilitate.
There Is One Part of the Draft Exchanges Welcome
The crypto industry has not rejected everything in the proposal.
One significant clarification is that simply buying and selling crypto through a licensed South African platform would be treated as a domestic transaction.
The official draft classifies the purchase of crypto with rand through a domestic authorised CASP as domestic and non-reportable. Transfers between two domestic authorised CASPs are treated similarly.
Luno’s Reitz welcomed this distinction, telling MyBroadband that crypto purchased and held within South Africa should be considered an onshore asset rather than automatically being treated as a foreign investment.
That could provide useful clarity for ordinary South African investors.
Someone buying Bitcoin with rand and keeping it with a South African exchange would not be using their foreign investment allowance simply because Bitcoin trades globally.
The cross-border rules would instead become relevant when the asset moves outside the locally regulated environment.
Why Regulators Want the New Framework
National Treasury and the SARB have their own reasons for bringing cryptocurrency into the capital-flow regime.
Blockchain networks allow financial value to move internationally without necessarily passing through conventional banks.
For example, a user can purchase USDT in South Africa and transfer it to a wallet controlled by someone overseas.
Economically, value has left the country even though there may have been no conventional international bank transfer.
The official SARB statement says the proposed framework is intended to make those flows easier to identify, consistently report and monitor while reducing regulatory arbitrage between financial businesses.
The authorities also want to improve their ability to detect illicit financial flows.
This is a legitimate regulatory challenge.
Crypto assets can move between wallets quickly and internationally, while traditional capital-control systems were largely designed around banks and conventional financial institutions.
The disagreement is therefore not necessarily about whether cross-border crypto should be regulated.
It is about how it should be regulated.
Ehsani Wants Technology-Neutral Regulation
Ehsani’s alternative is a system that regulates the movement of value rather than imposing different rules simply because blockchain technology is involved.
He has argued that if South Africa chooses to retain capital controls, those controls should be applied in a fair and technology-neutral manner.
In comments reported by MyBroadband, he said regulation should manage financial risks without dictating which technologies individuals and businesses are allowed to use.
In theory, that could mean allowing a company to make a legitimate cross-border payment with a stablecoin as long as the same reporting, compliance and capital-flow requirements that apply to an equivalent conventional payment are satisfied.
That approach would allow regulators to supervise the transaction while permitting companies to choose the underlying technology.
VALR Has Criticised the Broader Capital-Control Framework Before
Ehsani’s criticism of the Crypto Asset Manual is not his first objection to South Africa’s proposed capital-flow reforms.
He previously challenged elements of the broader Draft Capital Flow Management Regulations published in April 2026.
South Africa is replacing elements of an exchange-control system whose foundations stretch back decades. The government is attempting to modernise the regime while simultaneously bringing new categories such as crypto assets formally within it.
The National Treasury and SARB consultation acknowledges that feedback received on the wider Capital Flow Management Regulations has not yet been fully incorporated into the August Crypto Asset Manual. The authorities explicitly state that both documents remain subject to refinement.
That point matters because some of the industry’s objections could still result in changes.
The Rules Are Not Final
South African crypto users and businesses should not treat the current framework as settled law.
National Treasury and SARB are accepting written comments on the draft Crypto Asset Manual until September 30, 2026.
The authorities say they will consider stakeholder submissions and that the framework remains open to revision.
TechCentral also notes that the manual cannot take effect in its proposed form until the underlying Capital Flow Management Regulations are finalised.
The consultation process gives VALR, Luno, banks, fintech companies, investors, businesses and ordinary crypto users an opportunity to challenge provisions they believe could have unintended consequences.
Ehsani has indicated that he hopes the consultation results in a framework that allows South Africa to maintain appropriate oversight without damaging the competitiveness of its crypto industry.
