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Solidarity warns that the Treasury’s proposed new regulations on gold and cryptocurrency could open the door to sweeping state control of digital assets and even confiscation of cryptocurrency to the state.
The organization has already submitted comments on the draft capital flow management regulations and is now appealing to the public to participate in the public participation process before 30 June.
According to the proposed regulations, all cryptocurrencies will have to be declared to the state. Persons who fail to do so, or whose cryptocurrency according to the state was obtained in an improper or inexplicable manner, can be criminally prosecuted. The relevant assets can also be forfeited to the state.
Theuns du Buisson, economic researcher at the Solidarity Research Institute (SNI), says the proposed measures are out of touch with the realities of the modern economy.
“Crypto money is already part of many people’s investment portfolios and is increasingly being used to conduct international transactions quickly and cost-effectively. It does not make sense to create unnecessary obstacles for it,” he says.
Du Buisson argues that South Africa already has sufficient legislation to combat fraud, money laundering and other financial crimes. According to him, the draft regulations give the impression that cryptocurrency is mainly connected with criminal activities.
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He further warns that the regulations may harm South Africa’s attractiveness as an investment destination and says the country’s existing exchange control and capital flow restrictions already remain a deterrent for many potential investors.
“Many investors look past South Africa, because there is not sufficient certainty that they will be able to easily take their returns out of the country,” he says.
According to Du Buisson, the government should instead review and eventually abolish the existing control measures to promote greater economic freedom and investment confidence.
Solidarity says that policy changes with far-reaching consequences for investment, property rights and economic freedom must be subjected to thorough public debate before they are implemented.