Luno has filed a formal challenge against South Africa’s draft capital flow regulations, arguing the National Treasury’s plan to place digital assets under an apartheid-era exchange control regime is unconstitutional because it bypasses Parliament. The exchange wants the rules enacted as an Act of Parliament and the forced-sale and warrantless seizure provisions dropped.
Cryptocurrency exchange Luno has launched a formal challenge against a proposed overhaul of South Africa’s foreign exchange laws, arguing the National Treasury’s plan to bring digital assets under an apartheid-era capital flow regime is unconstitutional because it bypasses Parliament. Luno detailed the objection in its submission to the Treasury on the Draft Capital Flow Management Regulations.
Steep penalties draw the sharpest objection
The Treasury and the South African Reserve Bank jointly published the draft rules for public comment, aiming to modernize the country’s exchange controls. Luno warns the proposal contains highly restrictive measures that threaten fundamental property and privacy rights.
The draft would replace South Africa’s 1961 Exchange Control Regulations with a risk-based system focused on monitoring cross-border transactions and combating illicit financial flows. 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 alarms over three enforcement provisions: asset seizure without court orders, forced liquidations and business-ending sanctions. Marius Reitz, Luno’s general manager for Africa, argued that changes of this magnitude must not be enacted via ministerial regulation. According to Bitcoin.com News, Reitz said the executive branch “effectively bypasses the democratic process” by proceeding this way.
One framework for every digital asset
Luno further charged that the Treasury is contradicting the central bank’s own policy roadmap, which identifies stablecoins as potential future money for low-cost, borderless payments. Yet the draft treats all digital assets as identical, bringing bitcoin, stablecoins and tokenized real-world assets under the same restrictive framework.
The exchange also warned that reporting requirements for transactions above an unspecified threshold would create an unmanageable administrative burden, given that large volumes are processed within seconds. Overly restrictive rules, Luno added, simply push digital asset activity underground or offshore.
What Luno wants instead
Luno’s submission set out several recommendations. It calls for the final crypto capital flow framework to pass as an Act of Parliament rather than executive regulation, and for crypto assets held on South African-licensed exchanges to be designated as onshore assets.
Because rules should distinguish between digital asset classes by economic function, Luno wants the proposed forced-sale and warrantless seizure mechanisms dropped. It also argues non-resident international trading firms should be allowed to keep operating under appropriate registration to preserve market liquidity.
Source: Bitcoin News
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