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IS CRYPTO CAPITAL FOR PURPOSES OF ESTABLISHING THE SARB'S JURISDICTION OVER IT?

chrisdikane
Sep 17
7 min read

There has never been a judgment written by Judge Stuart Wilson which I have not been star struck by. It isnt just a judgment for legal professionals but one which a person not exposed to the legal field can pick up, read, and gain valuable insight. The Honorable Judge is most definitely to me as Legal centered mind in pursuit of creating access to Law through presenting writings which the public can engage with to better understand this force that governs their relationship with almost everything in life.



The understanding we seek to gain, in this herein writing, is an understanding regarding Cryptocurrency and our responsibilities when dealing with it in order to ensure that a 6 million rand valued trouble does not follow on our heels. We explore this understanding by looking at the judgment of Square Mangundhla and Fungai Dangaiso v South African Reserve Bank, Minister of Finance, and Deputy Governor, South African Reserve Bank, High Court of South Africa (Gauteng Division, Johannesburg), Case No. 2022-029979


Now from the Jump, the Honorable Judge Wilson tells us the legal question which will be clarified to us, the reader, the legal question being "whether cryptocurrency (in this instance

Bitcoin) constitutes either “money” or “capital” for the purposes of section 10

(1) (c) of the Exchange Control Regulations, 1961". And from jump, the judge does not waste time in giving us an answer which is Yes. So immediately, we now understand that Crypto (Bitcoin) is Capital or Money which enables us to understand the rules we need to comply with when dealing with. Rules which are basically the same when dealing with regular fiat currency. For purposes of gaining a holistic understanding of the legal position of cryptocurrency lets delve into the case by looking at its facts, its issues, applicable legal principle, the court evaluation and the final judgment. We will cap off by touching on the impact of this judgment to our lived realities. Lets begin with the Material Facts:


  1. Material Facts:

The story begins with the the First Applicant (Mr. Square Mangundhla- who we will refer to as Mr M) and Second Applicant (Ms. Fungai Dangaiso- who we will refer to as Ms F) held cryptocurrency trading accounts on the Luno platform. Ms. Dangaiso did not trade; Mr. Mangundhla utilized her account solely to circumvent trading limits applicable to his individual account. Now the judgment does not go into detail as to the exact operation which Mr M was involved but the man was making bank, phat stacks because between January 2018 and March 2020, Mr. M used the Luno accounts to funnel 1,680 Bitcoin (purchased in South Africa and valued at approximately R182 million- yup, over a 100 metre, not sure how many bricks that is, but it is alot of bricks) to Bitcoin wallets accessible only via cryptocurrency exchanges registered outside South Africa.

Now the Money people in the Governement, called the Treasury, require that if you are exporting money or capital outside of South Africa, then one has to obtain permission. You cant just- transfer money to your girl in Philipines without asking for permission from SARB. Anyway, Mr. M executed these transactions without obtaining permission from the National Treasury, which would be required for capital exports.

Exercising delegated powers under Regulation 22B of the Exchange Control Regulations, 1961, the Deputy Governor of the South African Reserve Bank (Third Respondent) issued orders declaring forfeit to the State approximately R6 million in Bitcoin assets and fiat money standing to the credit of the applicants' Standard Bank and Luno accounts. The Reserve Bank determined that these assets constituted either the proceeds of unlawful capital exports or were in the process of being unlawfully exported.


Now, 6 million rands is a ton of money, so its no surprise that Mr M brought a review application against the South African Reserve Bank due to feeling aggrieved by the SARBS decision to hit him with a 6 million rand "fine" for moving over a 180 million out of the country.

What is strange, is that the Applicant challenged the SARB'S decision to order Mr M to forfeit some money because of his transgression against the law, but according to the court's evaluation of the applicants case, the factual conclusions of the Reserve Bank's investigation report were undisputed, making the matter a pure question of law regarding statutory interpretation and procedural fairness


We now have an understanding of the story which makes up this dispute. Lets look at the issues which the court is placed to resolved.


  1. The Core Legal Issues:


  • Classification of Cryptocurrency: Whether cryptocurrency (specifically Bitcoin) constitutes "capital" within the meaning of Regulation 10(1)(c) of the Exchange Control Regulations, 1961.

  • Definition of Export: Whether transfering Bitcoin to cryptocurrency wallets hosted on foreign exchanges constitutes an "export" of capital under Regulation 10(1)(c).

  • Statutory Scope of Forfeiture ("Money" or "Goods"): Whether Bitcoin constitutes "money" (including a "negotiable instrument") or "goods" subject to forfeiture under Regulations 22A and 22B.

  • Procedural Fairness under PAJA: Whether the Reserve Bank's investigation and decision-making process were vitiated by procedural unfairness due to alleged insufficient response time.

  • Horizontal Stare Decisis: Whether the court was bound by the conflicting decision of Motha J in Standard Bank of South Africa v South African Reserve Bank 2025 (5) SA 289 (GP), or whether that decision was "clearly wrong"


  1. The Applicable Law: Legislation, Regulations and Case Precendent



  1. The Courts Evaluation


  • Bitcoin is "Capital": Cryptocurrency (specifically Bitcoin) is "capital" for the purposes of Regulation 10(1)(c) because it is a financial asset capable of holding value and acting as a medium of exchange.

  • Offshore Wallet Transfer is "Export": "Export" of capital occurs whenever a financial asset leaves South Africa or is placed beyond the Reserve Bank's jurisdiction. Crediting Bitcoin to a wallet hosted on a foreign exchange places the asset beyond the Reserve Bank's regulatory control and thus constitutes an export

  • Bitcoin is "Money": Bitcoin constitutes "money" under Regulations 22A and 22B because it is a negotiable instrument (a right to be credited a sum of Bitcoin exchangeable for fiat currency or value) and, functionally, serves as both a medium of exchange and a store of value


The Analytical Logic behinds the court evaluation:

  • Text, Context, and Purpose: The Exchange Control Regulations aim to prevent the loss of foreign-currency resources, curb unauthorized capital outflows, and protect the balance of payments (SARB v Shuttleworth). Excluding cryptocurrency from "capital" would undermine all three legislative objectives.

  • Distinguishing Oilwell: In Oilwell (Pty) Ltd v Protec International Ltd, "capital" was identified with "cash for investment" or "money used to produce wealth". Wilson J clarified that Oilwell does not restrict "capital" to central bank fiat currency. Even under a narrow financial asset test, Bitcoin falls squarely within the term.

  • Mechanism of Export: Exportation does not depend on identifying the foreign wallet holder's residency or establishing that the cryptocurrency was converted to foreign fiat currency. The threshold test for export is whether the asset has been moved beyond the Reserve Bank's territorial and regulatory jurisdiction.

  • Overruling Standard Bank: The court held that Standard Bank of South Africa v SARB was clearly wrong. Motha J had erred by focusing on cryptocurrency's lack of legal tender status and digital ledger nature. Courts must not treat novel technological phenomena as "irreducibly exotic" when they exhibit the exact functional attributes that exchange control legislation was enacted to regulate


  1. The Final Judgment:

The Court found that the Review Application must fail because Mr M did not comply with the rules espoused in legislation and regulation related to the transaction he was facilitating.


  1. The Impact of the Judgment on our Lived Realities:

This judgment directly impacts the everyday financial and legal realities of South Africans in three primary ways:

  • Strict Regulatory Compliance for Crypto Holders: Cryptocurrencies such as Bitcoin are formally recognized as both "money" and "capital" under South African Exchange Control Regulations. As a result, individuals transferring cryptocurrency from domestic trading platforms to wallets on foreign-registered exchanges are executing an export of capital. Performing these transfers without explicit National Treasury permission is illegal and subjects an individual’s digital assets and linked fiat bank accounts to state forfeiture.

  • Severe Personal Risk in Account Sharing: The ruling highlights major financial risks for individuals who allow friends, family, or associates to use their personal bank or trading accounts. People who lend their account credentials to help others bypass trading or capital export limits risk total forfeiture of the funds in their accounts—even if they played a passive role or were not actively trading—unless a distinct constitutional or proportionality challenge is formally pleaded.

  • Protection of Broader Economic Stability: On a macro level, the judgment prevents individuals from using digital asset platforms as unregulated channels for capital flight. By closing this loophole, the ruling protects national foreign-currency reserves, preserves the Reserve Bank's oversight over balance-of-payments outflows, and safeguards the broader domestic economy from destabilizing capital flight.




Disclaimer: The views and analyses expressed on this blog are for informational and educational purposes only. This site serves as a self-guiding diary intended to facilitate my personal understanding of specific subjects and does not serve as an authoritative reference. Information is provided "as is" without any guarantees of completeness or accuracy. Please consult a local, professionally trained individual in the subject matter or you can conduct your own research for any formal inquiries or professional advice. PSA, dont corner an attorney at a Maza or a Braai on a weekend and consult there. Preferably arrange an appointment with the office


 
 
 

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