NATIONAL TREASURY’S draft capital flow regulations contain a definition of “crypto asset” so broad it would capture green energy certificates, governance tokens, and loyalty points. Here’s why that matters — and what needs to change.

There is a particular type of odious regulatory error that is hard to spot from the inside. It isn’t malicious. It isn’t even careless. It is the error of writing a rule about a technology when you meant to write a rule about a risk. South Africa’s National Treasury has, in the Draft Capital Flow Management Regulations 2026, made exactly this mistake — and the consequences, if left uncorrected, will be quietly devastating for local blockchain innovation.

The regulations are built on the Currency and Exchanges Act of 1933 and aside from the controversy involving self-custody, have a legitimate purpose: managing cross-border capital flows to protect South Africa’s foreign currency reserves. No serious person disputes the need for oversight in that space, (moving ZAR 1 million worth of ETH, is an entirely different order of magnitude to exchanging a few Satoshis).

Apart from the rights issues related to self-custody, which I will leave up to the broader community to argue, and perhaps tackle at a later stage, the significant consequence that I address here is entirely in the execution — specifically, in how the regulations define a “crypto asset.”

Under Regulation 1(1), a crypto asset is any digital representation of value that uses cryptographic techniques, runs on distributed ledger technology, and can be traded, transferred, or stored for “payment, investment, and other forms of utility.” That final phrase — other forms of utility — is where things go badly wrong. It is so expansive that it describes virtually every token ever written to a blockchain, regardless of whether it has anything to do with money

The definition as currently drafted regulates the technology, not the financial risk.  
That is a regulatory error with serious innovation consequences.
— from my public comment submission, April 2026

Consider the kinds of projects this captures. Any system that places renewable energy certificates on a blockchain — not to create a tradable financial instrument, but to bring transparency and traceability to South Africa’s green energy market. Any digital ledger system that attests that a corporation’s ESG claims can be verified with a single transaction hash rather than a stack of PDFs.

Under the draft definition, every time a certificate moves from a rooftop solar producer to a corporate buyer, that is a regulated capital transaction requiring National Treasury’s blessing. Such a token is an environmental compliance instrument. It is not a currency. It is not a security. But the definition does not care about that distinction.

Or consider a platform that issues governance tokens purely to let its users vote on how the platform should evolve — no cash value, no exchange listing, no investment proposition. The token in a Decentralised Autonomous Organisation (DAO) is purely a mechanism for collective decision-making, the digital equivalent of a show of hands. It too falls squarely within the definition.

Same with platform gaming tokens, rewarding users for participation and loyalty points offering no external financial value. Any blockchain-based supply chain, credential, and identity system that is aimed at reducing fraud, improving public service delivery, and which seeks to create the trust infrastructure that underpins a modern digital economy, all will treated as if they pose an eminent threat to our financial institutions and foreign exchange regime.

This is not how mature jurisdictions approach the problem. The EU’s MiCA regulation explicitly defines utility tokens as those “only intended to provide access to a good or a service” and exempts them from its heaviest requirements. Singapore’s MAS confirmed in June 2025 that utility and governance token providers are entirely outside its new licensing regime. Switzerland’s FINMA has used a three-way classification — payment tokens, utility tokens, asset tokens — since 2018, treating only the last category as a financial instrument. In each case, the regulator asked the same foundational question: what does this token actually do? That functional test is the international standard. South Africa’s definition ignores it entirely.

What Needs to Change

The fix is not complex. The definition needs a functional limitation — a carve-out exemption making clear that tokens whose sole purpose is to provide access to a service, record an environmental attribute, or facilitate governance decisions are not “crypto assets” for exchange control purposes. Alternatively, National Treasury should publish a token classification framework, as Switzerland and Singapore have done, so that developers can make investment decisions with some confidence about where the regulatory line falls.

South Africa is trying to build a digital economy while simultaneously managing a real and legitimate exchange control challenge — and any transaction under the annual forex limit would presumably not fall into the treasury net?

Both goals are achievable. But they require a regulation that targets financial risk — not one that targets the existence of a blockchain.

I have filed a formal public comment submission on the Draft Regulations. The comment period is open. If you are building anything on a blockchain in this country, now is the moment to make your voice heard.

NOTE: The Issue of self-custody is an entirely separate rights issue and is not dealt with in detail by either this article or my submission.