South African Reserve Bank launches consultation on cross-border crypto asset framework with three provider categories

The South African Reserve Bank has published a draft Crypto Asset Manual for public comment, setting out how crypto asset service providers would be authorized and regulated for cross-border activities under the draft Capital Flow Management Regulations. The framework would classify providers into three categories covering crypto-based remittances, custodial wallets that support specified cross-border transactions, or a combination of both. Transfers between domestic authorized providers would be treated as domestic, while transfers between a domestic provider and an offshore provider, or outbound transfers to a non-custodial wallet, would generally be classified and reported as cross-border capital flows. Category One remittances would be capped at ZAR 5,000 per transaction per day and ZAR 25,000 per applicant per month. Category Two would allow resident individuals to transfer crypto assets abroad within the ZAR 2 million single discretionary allowance or the ZAR 10 million foreign capital allowance, subject to applicable identification and tax compliance requirements. Resident entities would not be permitted to import or export capital through crypto assets. Authorized providers would also face governance, client asset segregation, record-keeping, reporting and daily reconciliation requirements, and would have to maintain unimpaired capital equal to the higher of ZAR 5 million or 15% of average positive annual gross income over the preceding three years. The South African Reserve Bank will make the detailed reporting categories, technical specifications and operations manual available once the cross-border crypto asset policy framework has been formally adopted.