VALR CEO Slams South Africa’s Crypto Regulation Over Exchange Controls

What to Know

• VALR CEO Farzam Ehsani has called for South Africa to abolish exchange controls and replace them with modern reporting and supervision frameworks.
• His comments come in response to the proposed Capital Flow Management Regulations intended to replace the 1961 Exchange Control Regulations.
• Ehsani argues that the rationale behind exchange controls is based on an outdated understanding of how money and capital move in a digital economy.
• He believes targeted AML, tax, and compliance measures can replace restrictive capital controls.
• The debate reflects broader tensions between financial sovereignty and digital asset innovation.

In an opinion article published on X, Farzam Ehsani, CEO and co-founder of VALR, one of South Africa’s largest exchanges, criticises South Africa’s exchange controls.

In the article, titled “Exchange Control: The Fallacy of Capital Flight in a Digital Rand Economy,” he argues that two out of the three main policy objectives for exchange control rely on an outdated “mental model.”

Farzam Ehsani argues that they were designed for a world of gold bars and bearer certificates crossing physical borders, and they have no business regulating a digital economy. 

Why Ehsani Is Challenging South Africa’s Exchange Controls

His article arrives as a public comment on the National Treasury and the South African Reserve Bank (SARB) proposed and published draft Capital Flow Management Regulations in April 2026.

The draft was intended to modernise the Exchange Control Regulations, which have been in place since 1961. The windows for public comment were initially supposed to end on the 18th of May 2026, but were extended to the 30th of June 2026 after pushback from the crypto industry and other stakeholders.

The Digital Money Problem

Ehsani does not argue that oversight is unnecessary. He argues that the assumptions underlying capital and exchange controls no longer reflect how money actually moves in the era of digital banking.

Exchange controls, Ehsani writes, are typically justified on three grounds. They are meant to prevent capital flight, protect foreign currency reserves, and maintain economic and currency stability.

The framework, he argues, was designed for an era when wealth moved through physical instruments such as cash, gold, and bearer bonds. These physical instruments could literally cross a border. That world no longer exists.

In Farzam’s words; 

They imagine the rand as something the state must defend by spending scarce dollars. They imagine private citizens or businesses converting rand into dollars as a direct loss to South Africa. But in a modern digital banking system, that is not what happens.

According to Ehsani, an estimated 97% of South Africa’s money supply is now digital. This means money exists as ledger entries on bank balance sheets, rather than physical notes. This digital money, he says, cannot be “loaded onto a ship” and taken away.

This changes the nature of what exchange controls are trying to control. When a South African converts rands into dollars, their rands do not leave the country.

An individual cannot buy dollars, he writes, without another selling dollars. All of which happens in the South African rand banking system.

From an individual perspective, value may have moved offshore. But from a macroeconomic perspective, no capital was externalised from the system. All that happened was a change in ownership.

The Same Logic Extends to SARB Foreign Reserves

The same logic extends to SARB foreign reserves. These are public-sector assets held for managing external obligations, systemic liquidity, and macroeconomic shocks. They are not a national pool that gets depleted when a private citizen buys dollars or invests in crypto.

This misrepresentation is part of the foundation used to justify exchange control decisions, which add unnecessary economic friction, he argues.

Ehsani believes that South Africa should instead make itself more attractive to investors.

He doesn’t deny that a greater demand for dollars than for rand could affect the rand’s value or cause inflation. He acknowledges that it could call for credible monetary and fiscal policy.

Ehsani, however, calls it “an exchange-rate price adjustment, not a physical draining of rand from the country.” In a floating exchange-rate system, he writes, the price is supposed to adjust.”

He argues that instead of focusing on preventing individuals from withdrawing money from the South African economy, the focus should be on encouraging investment in South Africa.

“The real policy problem is not that rand disappears, or capital has been externalised. The real policy problem is whether South Africa is attractive enough that people want to hold rand assets in the first place.”

Stablecoins and the Blockchain Dimension

Stablecoins pegged to the US dollar are increasingly used for cross-border payments, treasury management, and trade settlement across Africa.

They enable near-instant cross-border transfers without routing through traditional banking infrastructure. This creates a structural tension with exchange controls, which assume that capital moves through centralised institutions that can be monitored and restricted at the point of transaction.

Blockchain networks do not operate that way. Value can move across borders instantly, peer-to-peer, without a South African bank acting as intermediary.

The proposed provisions in the regulations on crypto ownership thresholds and forced liquidation are attempts to impose a centralised control framework on a decentralised infrastructure.

This mismatch, the industry argues, will drive activity offshore rather than bring it under effective oversight.

Better Oversight, Not Less Oversight

Ehsani is careful to frame his argument not as a call for deregulation, but for a different kind of regulation. He is not the first to do so. 

Luno’s CEO, James Lanigan, has previously argued that the proposed regulations could cause South Africa to miss out on one of the fastest-growing segments of global finance. 

Ehsani proposes replacing the proposed model, which requires individuals and businesses to obtain approval for cross-border transactions, with a disclosure-based framework. This framework should be built on tax enforcement, anti-money laundering (AML) rules, beneficial ownership reporting, prudential supervision, and transaction monitoring.

The current model is essentially gatekeeping, and the economic cost of that gatekeeping, Ehsani argues, is substantial.

He argues that they create friction for entrepreneurs seeking international capital to establish a presence, discourage foreign companies from domiciling in South Africa by signalling to global investors that capital cannot move freely in and out of the country.

Mandela’s Unfinished Business

Ehsani also quotes Nelson Mandela’s 1996 State of the Nation Address. 

To improve the investment climate, our monetary authorities are reviewing, on an ongoing basis, the timing and pace of lifting existing exchange controls. For us, it is not a matter of whether, but of when, these controls will be phased out.

He argues that even Mandela saw exchange controls as a matter of timing rather than principle. It is now time, he writes, “to bring that vision to reality.” 

Ehsani frames his proposal not as a radical rupture but as the completion of a transition that was always envisioned.

Policymakers will either accept or decline that framing depending on how much weight they assign to financial sovereignty arguments versus the economic competitiveness case Ehsani is making.

What Comes Next

The public consultation period closes on 30th June 2026. Treasury and SARB are expected to release a separate draft manual with more specific guidance on digital asset rules.

Industry participants will continue to push for clearer rules that can support digital asset innovation without exposing South Africa’s financial system to risks. 

Ehsani’s article has raised a new question. Should South Africa simply modernise exchange controls, or should it reconsider whether they belong in a digital economy at all?