Cryptocurrency exchange Luno launched a formal challenge in 2026 against South Africa's proposed foreign exchange law overhaul, arguing the National Treasury's plan to bring digital assets under capital flow regulations is unconstitutional because it bypasses Parliament. The challenge was detailed in Luno's submission to the National Treasury on the Draft Capital Flow Management Regulations. The draft rules, jointly published by the Treasury and the South African Reserve Bank, aim to modernize the country's exchange controls by replacing the 1961 Exchange Control Regulations with a risk-based system focused on monitoring cross-border transactions and combating illicit financial flows.
Draft Regulations Propose Penalties Up to 1 Million Rand and Asset Seizure Powers
The draft regulations propose violations could carry penalties of up to five years in prison, a fine of $53,000 (1 million South African rand), or both. In its submission, Luno raised concerns over three specific enforcement provisions: asset seizure without court orders, forced liquidations and business-ending sanctions. Marius Reitz, Luno's general manager for Africa, stated that changes of this magnitude must not be enacted via ministerial regulation. "By proceeding through ministerial regulation, the executive branch effectively bypasses the democratic process for changes that will affect the fundamental property and privacy rights of millions of South Africans," Reitz said. "They should, in our view, have been enacted as a new Act passed through Parliament." Luno argued the National Treasury is contradicting the central bank's own policy roadmap, which identifies stablecoins as potential future money capable of facilitating low-cost, borderless payments. The exchange warned that the proposed reporting requirements for transactions above an unspecified threshold would create an "unmanageable administrative burden" for platforms and the state alike. "Our experience demonstrates that overly restrictive regulation simply pushes digital asset activity underground or offshore, beyond the reach of domestic regulators and tax authorities," the company stated.
Luno Recommends Five Key Changes Including Parliamentary Enactment
Luno's submission shared several key recommendations to resolve friction points. First, Luno calls for the enactment of the final crypto capital flow framework through an Act of Parliament rather than executive regulation. It also recommends the designation of crypto assets bought and held on South African-licensed exchanges as onshore assets. Luno wants regulations to distinguish between digital asset classes based on economic function while dropping the proposed forced-sale and warrantless asset seizure mechanisms. Non-resident international trading firms must also be allowed to continue operating in the South African market under appropriate registration to preserve market liquidity. "South Africa needs a regulatory framework that protects the integrity of the digital asset system without stifling the innovation, investment and economic growth that the digital asset sector is uniquely positioned to deliver," Reitz said.
FAQ
What did Luno challenge in 2026 regarding South Africa's crypto regulations?
Luno launched a formal challenge in 2026 against South Africa's proposed foreign exchange law overhaul, arguing the National Treasury's plan to bring digital assets under capital flow regulations is unconstitutional because it bypasses Parliament. The challenge was detailed in Luno's submission to the National Treasury on the Draft Capital Flow Management Regulations.
What penalties do the draft regulations propose for violations?
The draft regulations propose violations could carry penalties of up to five years in prison, a fine of $53,000 (1 million South African rand), or both. Luno raised concerns over three specific enforcement provisions in its submission: asset seizure without court orders, forced liquidations and business-ending sanctions.
