South Africa’s Central Bank Bars Moving Bitcoin to Offshore Exchanges, Including DEXes

The South African Reserve Bank (SARB) has clarified that it is illegal for Bitcoin investors to transfer the asset class to a foreign cryptocurrency exchange, including decentralized exchanges running on blockchain networks.

Local media outlet, MyBroadBand reports today that the bank noted this when it tried to get clarity on the Frequently Asked Questions (FAQ) about cryptocurrencies’ document published last month. Per the report, SARB is not against the transfer of funds from exchanges within its regulatory purview.

However, the SARB’s only concern is against its citizens transferring funds to and from trading platforms that are based offshore, the report added.

“Transferring crypto assets from self-hosted or private wallets to an offshore-based wallet — whether hosted or non-hosted or operated by a business entity such as a foreign-domiciled crypto asset trading platform or an individual, would constitute a contravention of Exchange Control Regulation 10(1)(c),” SARB reportedly said in a statement.

The central bank further noted that “From the Financial Surveillance Department’s perspective, decentralized exchanges would be viewed as foreign crypto assets service providers.”

The Exchange Control Regulation 10(1)(c) is established to control the movement of funds out of South Africa without getting permission from the National Treasury.

Notably, citizens who go against this regulation would be slammed with an RS250,000 ($17,400) fine, and the offender could spend up to five years in prison. The penalty fee could increase up to the amount of the transaction in certain circumstances, MyBroadBand said.

Traditional Bank Users Not Affected

While this regulation prevents customers from sending funds to crypto-related exchanges abroad, traditional financial institutions are not affected by the rule.

Traditional financial institutions’ clients are allowed to make purchases with their credit cards, send money via Western Union, and a host of many other services. SARB noted that traditional institutions’ clients are allowed to do so because the sector already has its working regulations.

Since the crypto industry is relatively new, SARB said it is in the process of developing its own set of rules that could allow its clients to transfer assets abroad.

Until the regulation is fully established, it is illegal for crypto users to transfer funds abroad, the SARB said.

Meanwhile, Coinfomania reported that the SARB has already proposed some set of rules that could govern the industry. However, since the proposal was made, it has not been implemented.