In its formal submission to the South African Reserve Bank (Sarb), the crypto platform argues that the proposed Crypto Asset Manual could increase costs for consumers, restrict local businesses and push activity into opaque, unregulated channels.
Luno says targeted changes could instead create a framework aligned with global best practice, supporting innovation, investment and jobs while strengthening oversight and consumer protection.
"We share the overarching goals that the Treasury and the Sarb have. We all want a modern system with a sharp focus on reporting higher-risk flows," said Marius Reitz, Luno's general manager for Africa.
"Our submission aims at helping the final rules deliver on that promise. Get this right, and South Africa keeps investment and jobs. Get it wrong, and South Africa's economy will simply not be ready for the future, and in effect render itself irrelevant in a modern and fast-evolving global financial system."
The draft manual does get several important elements right - the most significant of which is that buying and holding crypto on a locally licensed platform is treated as a domestic activity. Only moving crypto offshore or off-platform counts as cross-border.
However, Luno has concerns about several provisions which, as currently drafted, would actually work against the Sarb and Treasury's own stated goals of a modern and thriving financial sector that remains safe, secure and stable.
The draft manual bans all South African companies from moving crypto across the border, in any direction. This would include the use of stablecoins, a type of cryptocurrency whose value is pegged to a stable real-world asset, such as the South African rand, which enables companies to settle payments and make intercompany transfers almost instantly, rather than through the slower and more expensive process of settling through correspondent banks.
Individuals get allowances, but companies get no threshold, no exception and no way to apply. That is out of step with today’s reality, where companies routinely invest and trade abroad through their banks. It also contradicts the Budget Speech earlier this year, which spoke about adopting a “positive bias” framework.
This will have several negative consequences. "Market makers", the firms that keep local crypto prices in line with global prices, are almost exclusively companies. Without them, trading gets thinner and South Africans pay more to buy and hold crypto. If local platforms become pricier and less liquid, the drop in trading volumes that will inevitably follow will have a negative impact on the sustainability of the local industry, future innovation in South Africa, and tax revenue for the state.
Legitimate business would also be blocked. For example, South African exporters paid in stablecoins will not be able to receive payment lawfully, and companies operating elsewhere in Africa will lose a practical way to repatriate earnings home and contribute to the local fiscus.
The UAE, Singapore, the UK and the EU all include companies in their crypto regulatory frameworks, and South Africa will fall behind as a result - foregoing any possibility of competing with other countries.
Outside of the ban on South African companies moving crypto across the border, other serious issues should be addressed as well.
Under the draft manual, crypto can leave a South African platform but can never return, even from a customer’s own private wallet. This could actually push assets offshore.
Also, all payments in stablecoins would be treated as capital (rather than current) flows - this while the same invoice paid in, for instance, US dollars through a bank would not. Treating payments differently merely based on the instrument used raises questions about consistency with South Africa's International Monetary Fund commitments and the Sarb's own methodology.
It stems from a foundational error in the regulations, which is to treat all crypto assets alike, based on their form rather than their function. The manual brings Bitcoin, stablecoins and utility tokens all under a single set of rules, even though the Sarb's own research and frameworks recognise that they are different and need to be treated accordingly.
Luno is also concerned about transaction limits, which are too low for real-world remittances.
"We regard the draft manual as a starting point rather than a final position. As currently drafted, it will definitely constrain a sector with the potential to contribute meaningfully to South Africa's economy - from higher tax revenue for the fiscus to faster, cheaper payments and greater financial inclusion.
"Luno is committed to engaging further with the Sarb and National Treasury to refine the framework, so that South Africa does not fall behind," said Reitz.
