Introduction
Two Gauteng Division judgements have reached diametrically opposite
conclusions on the question as to whether cryptocurrency constitutes
“capital” for the purposes of the Exchange Control Regulations, 1961
issued in terms of the Currency and Exchanges Act, 1933 (the
“Regulations“). In Standard Bank of South Africa v South African Reserve
Bank and Others 2025 (5) SA 289 (GP), Motha J held that cryptocurrency
falls outside the ambit of the Regulations entirely. Barely a year later,
in Mangundhla and Another v South African Reserve Bank and
Others 2026 JDR 2449 (GJ), Wilson J expressly disagreed, finding that
cryptocurrency is plainly “capital” under Regulation 10(1)(c). This article
examines the reasons why Wilson J concluded that the Standard Bank
decision was “clearly wrong”.
The Standard Bank case: ‘Cryptocurrency falls outside the ambit of the regulations’
In the Standard Bank case, the South African Reserve Bank had ordered
the forfeiture of approximately R16.4 million on the basis that LCC had
contravened Regulations 3(1)(c) and 10(1)(c). Motha J held that
cryptocurrency is neither currency nor capital, observing that “the
construction that cryptocurrency is money, by looking at the definition of
money which includes foreign currency, is strained and impractical.” He
found that, given the punitive nature of the Regulations, there was “no
room for an unnatural and fictitious reading” so as to apply to
cryptocurrency, and that “on any construction, much less on a restrictive
interpretation, cryptocurrency falls outside the ambit of capital under Reg
10(1)(c).” The judgement has been appealed and its findings are therefore
not currently in effect.
The Mangundhla case: ‘Cryptocurrency is plainly capital’
In the Mangundhla case, Mr Mangundhla had used cryptocurrency trading
accounts to purchase approximately 1,680 Bitcoin, worth just under R182
million, and transfer same to Bitcoin wallets accessible only through
cryptocurrency exchanges registered outside South Africa. The South
African Reserve Bank ordered the forfeiture of approximately R6 million
on the basis that the transactions contravened Regulation 10(1)(c).
Wilson J approached the question as an exercise in statutory
interpretation, applying the tripartite test of text, context and purpose.
Wilson J accepted that “capital” in the Regulations refers to capital in its
financial sense, closely identified with “cash for investment” or “money
that can be used to produce further wealth.” However, Wilson J
distinguished “capital” from “currency,” noting that the two terms are
deployed in the Regulations to mean different things. The court regarded
“capital” as “any financial asset that is capable of holding value or being
used as a medium of exchange,” a category which includes fiat currency
but extends to any document or token bearing a fixed or ascertainable
exchange value.
Based on this reasoning, Wilson J found that Bitcoin is “plainly capital”
because it is a financial asset capable of holding value and being used as
a medium of exchange. Wilson J also considered the purpose of the
Regulations, finding that the regulation of Bitcoin as ‘capital’ is essential
to maintain the effectiveness of capital controls. Were it otherwise, the
exchange control regime “would be virtually worthless, as anyone of any
means who wished to take their money abroad could do so without
Treasury oversight, simply by converting it into cryptocurrency and
transferring it to a foreign cryptocurrency exchange.”
Judge Wilson’s criticism of the judgment in the Standard Bank case
Wilson J expressly considered and rejected the Standard Bank decision.
Wilson J found Motha J’s reasoning to be flawed on several grounds – Wilson J:
- Held that Motha J had placed undue emphasis on the intangible and
technological characteristics of cryptocurrency, which amounted to
what Wilson J described as “a degree of magical thinking which
misconstrues the nature of money, underplays the destructive
effects of unregulated capital flows, and ignores the fundamental
purpose of the Exchange Control Regulations.” The critical question
is not the inherent nature of cryptocurrency, but the purposes to
which it can be put. To the extent that cryptocurrency is a financial
asset that holds value and can move capital beyond South Africa’s
borders, its technological novelty is irrelevant. Wilson J cautioned
that “courts should be careful not to ascribe unusual or irreducibly
exotic properties to phenomena which, though novel and perhaps
unique in some respects, exhibit precisely the attributes an
enactment is intended to regulate.”
-
Disagreed with Motha J’s reliance on the principle that punitive
statutes require restrictive interpretation. Whilst acknowledging
that principle, Wilson J held that the overriding function of a court
is to give a statute the appropriate meaning in light of its words,
context and purpose. Where the only reasonable interpretation is
that a statute intends to attach harsh consequences to defined
conduct, the statute must be applied as it is found. The three-foldPurpose of the Regulations, as articulated by the Supreme Court of
Appeal in South African Reserve Bank v Leathern NO 2021 (5) SA 543
(SCA), is to prevent the loss of foreign currency resources, ensure
effective control of the movement of financial assets into and out of
South Africa, and avoid interference with the country’s commercial
and financial system. All three purposes would be frustrated by
excluding cryptocurrency from the definition of capital.
- Dismissed the relevance of various reports published by entities
associated with the South African Reserve Bank suggesting that
cryptocurrency might not be adequately regulated by the existing
framework. Nor was it relevant that the drafters of the Currency and
Exchanges Act and Regulations in the 1930s and 1960s could not
have foreseen cryptocurrency; they “certainly knew all about the
nature of financial assets, negotiable instruments, and fiat currency”
and would have had no difficulty understanding the essentials of
Bitcoin.
Conclusion
The Mangundhla judgement represents a significant departure from the
Standard Bank decision, creating legal uncertainty because two judges of
the Gauteng Division have now reached opposite conclusions on the same
legal question, with neither judgement binding on the other. In April
2026, the draft Capital Flow Management Regulations were published,
seeking inter alia to formally include cross-border transfers of crypto
assets within the exchange control framework. The conflict may be settled
when a higher court resolves the issue, or these draft Regulations become
law and are not challenged.
