When Nelson Mandela stood before parliament in February 1996, he made a commitment that should have been one of the defining economic reforms of the democratic era. “For us, it is not a matter of whether, but of when, these controls will be phased out,” he said of exchange controls, echoing a similar pledge made two years earlier and which he would repeat again in 1997.

Thirty years on, exchange controls are not only still with us, but national treasury is trying to extend them to a technology that did not exist when Mandela spoke. Treasury’s draft Capital Flow Management Regulations, gazetted on 17 April, would replace the apartheid-era Exchange Control Regulations of 1961 and, for the first time, bring crypto assets formally within South Africa’s capital flow management framework.

The public comment period closes on 30 June, an extension from the previous date of 18 May. That treasury has been forced to extend the comment window — and to acknowledge publicly that “most of these concerns relate to the treatment, possession and trade of crypto assets” — is a clear sign that the draft is in trouble.

It is hard to overstate how badly conceived this draft is. Among other things, it grants enforcement officers warrantless powers to search and seize assets – including, by implication, the right to inspect mobile phones for crypto apps at airports.

It requires every buyer of a crypto asset to make a written declaration of when and how it was acquired, and where it is held. Contraventions carry fines of up to R1-million and prison sentences of up to five years. It is the architecture of a surveillance state, dressed up as financial modernisation.

The latest to question the regulations publicly is Dawie Roodt, chief economist of the Efficient Group and one of the most prominent mainstream voices in South African financial commentary. Roodt is not a crypto evangelist. He is the kind of economist whose views appear in board reports and broker notes. And he is scathing about treasury’s draft.

‘Completely clueless’

“It just goes to show that the people that proposed it made these proposals simply do not understand what they are talking about,” Roodt said in a very good interview this week with business journalist Alec Hogg. “They are completely clueless on the nature of this technology.”

Holding up a cold-storage hardware wallet – a device the size of a memory stick that can be bought on Takealot – Roodt explained that he could memorise its recovery phrase, throw the device into a fire, fly to any country in the world, and recover his crypto assets simply by entering those words on the other side. “Are they going to get into my head now?” he asked pointedly. The regulations are not just intrusive; they are unenforceable against anyone who understands the technology they purport to police.

Read: AI, crypto and biometrics reshaping how South Africans pay

The South African government has spent decades treating its ability to monitor and restrict capital flows as a core function of sovereignty. Crypto, particularly when self-custodied, breaks that assumption. As Roodt put it, “crypto is information – it’s like a WhatsApp message… Information is not limited to South Africa.”

The bitcoin blockchain sits on tens of thousands of servers worldwide. It does not cross borders because it has no borders to cross. Treasury can pass whatever legislation it likes; the laws of mathematics will continue to work as before.

“Don’t believe this nonsense about terrorism and all that,” said Roodt. “Of course they’re concerned about that, but they’re primarily concerned about losing tax revenue.”

What makes the situation so absurd is that the case for scrapping exchange controls altogether has been settled for decades – including inside the state itself.

In 2005, then-Reserve Bank governor Tito Mboweni told an audience that “for all intents and purposes exchange controls have become purposeless… The cost of exchange control administration and the inconvenience that goes with managing it might not be worth the exercise.” That was 21 years ago!

VALR CEO Farzam Ehsani made the same case in his formal submission on the draft regulations, asking why South Africa insists on preserving a regime that even its own monetary authorities have long since dismissed.

Why have these controls survived? Partly it’s bureaucratic inertia: thousands of compliance jobs, banking processes and regulatory templates are built around them. Partly it’s the Reserve Bank’s institutional caution, which is generally a virtue but in this case has calcified into immobility. Lastly, it’s partly because exchange controls give the state a tool that no modern democracy should give itself: the right to dictate where its citizens may deploy their own legally earned, fully taxed capital.

It is fair to ask what would happen if they were abolished. The honest answer is that there would be short-term costs. Some capital would leave the country. The rand may weaken. The Reserve Bank would need to develop a proper macroprudential toolkit to manage cross-border flows without resorting to a permission-based regime. None of these costs are trivial. But they are not theoretical either: the UK faced them in 1979, Singapore in 1978, Spain in the 1970s, Taiwan in 1987, France in 1989 and Finland in 1990. None of those economies collapsed. All of them ended up more competitive, more investable and more credible.

Political will

South Africa has the macroeconomic plumbing – an inflation-targeting central bank, a flexible exchange rate and a sophisticated financial system – to make the transition without inflicting massive pain. What it lacks is the political will.

The cost of that lack of will is invisible but enormous. Every prospective foreign investor weighing South Africa against jurisdictions that abolished their capital controls a generation ago has to factor in the friction of doing business in a country that still treats outbound capital as suspect. We complain about anaemic foreign direct investment while maintaining an onerous capital control regime.

Read: Bitcoin firm headed to JSE main board

Roodt’s broader observation is one worth dwelling on. The South African state, he argued, is being made irrelevant in real time. Mismanage Eskom, and the private sector puts solar panels on its roofs. Run local authorities into the ground, and residents pay for their own security, their own roads, their own water. Now treasury wants to regulate crypto out of existence, and Roodt’s prediction is simple: people will ignore them. “Just ignore the state and go on, create state-proof businesses,” he said. “That’s what people are doing.”

That is not a future any serious democrat should welcome. The answer is not for the state to chase its citizens further into the shadows with ever-more-intrusive regulations. The answer is to honour Mandela’s commitment, finally, and to scrap exchange controls altogether.

What Roodt describes is, in essence, rooftop solar for the financial system. When the state fails to provide reliable electricity, those with the means buy their way out of the grid. When the state insists on using exchange controls as an instrument of political control over private capital, those with the requisite technical literacy will, increasingly, buy their way out of the rand.

Read: South Africa’s crypto progress on the line

The draft regulations, if anything, will accelerate that exit by making compliance so onerous that more people will conclude the unregulated path is the rational one. Treasury is not regulating crypto into submission. It is regulating itself into irrelevance.

The draft regulations should be withdrawn. South Africans, including those who make submissions before the 30 June deadline, deserve a treasury that understands the technology it seeks to regulate, the country it is meant to serve and the promises that were made when this democracy was born. – © 2026 NewsCentral Media

The author, Duncan McLeod, is editor of TechCentral