The Regulation of Cryptocurrencies to Combat Money Laundering: A South African Perspective

• Citation: (2025) 37 SA Merc LJ 67
• DOI: https://doi.org/10.47348/SAMLJ/v37/i1a4
• Published date: 15 October 2025
• Pages: 67-104
• Author: Subramanien, D.
• Date: 15 October 2025

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THE REGULATION OF CRYPTOCURRENCIES

TO COMBAT MONEY LAUNDERING:

A SOUTH AFRICAN PERSPECTIVE

DARREN SUBRAMANIEN*

Associate Professor of Law, University of KwaZulu Natal

RABIA HUSSAIN**

Post Graduate Student, University of KwaZulu Natal

LEGODI THUTSE***

Lecturer, Department of Private Law, University of Pretoria

Abstract

Cryptocurrencies are not wholly regulated or recognised as legal tender

in South Africa. This makes South Africa a prime breeding ground for

criminals to launder money using cryptocurrencies. In February 2023,

South Africa was grey listed by the Financial Action Task Force for not

fully complying with their anti-money laundering standards. It is likely

that the unregulated use of cryptocurrencies, which carry significant

money laundering risks, could have contributed to the grey listing of

South Africa. South Africa recently took steps towards regulating

cryptocurrencies to combat money laundering as crypto assets were

declared financial products for the purposes of the Financial Advisory

and Intermediary Services Act 37 of 2002, and Crypto Asset Service

Providers (CASPs) were included as accountable institutions for the

purposes of the Financial Intelligence Centre Act 38 of 2001.

Keywords: cryptocurrencies; money laundering; regulation; blockchain

technology; Financial Intelligence Centre Act (FICA); Crypto Asset Service

Providers (CASPs); anti-money laundering (AML).

I INTRODUCTION

The advent of the Covid-19 pandemic saw an increase in the use of

cryptocurrencies, which offer advantages such as anonymity and

* LLB, LLM, PHD (UKZN).

** LLB, LLM (UKZN).

*** LLB, LLM (Mercantile Law) (UP).

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cost-effectiveness.

1

Cryptocurrencies are crypto assets as they are a

digital representation of value.

2

However, they pose risks to f‌inancial

sectors as they are used for money laundering, terrorism f‌inancing,

fraud, and tax evasion.

3

Furthermore, they are not comprehensively

regulated. In 2021, El Salvador became the f‌irst country to declare

cryptocurrencies as legal tender

4

followed by the Central African

Republic and Venezuela.

5

However, in South Africa, the South African

Reserve Bank (SARB) issued a paper in which it stated that in terms of

the South African Reserve Bank Act

6

(SARB Act) cryptocurrencies do

not fall within the def‌inition of legal tender.

7

South African f‌inancial regulators have published various other

discussion and position papers regarding the regulation of cryptocurrency.

8

Consequently, crypto assets were declared f‌inancial products in terms of the

Financial Advisory and Intermediary Services (FAIS) Act

9

and Crypto Asset

Service Providers (CASPs) were included as accountable institutions for the

purposes of the Financial Intelligence Centre Act (FICA).

10

Despite these

regulatory efforts, def‌iciencies prevail when cryptocurrencies are used for

money laundering.

A 2013–2014 report by the global f‌inancial crime watchdog, the

Financial Action Task Force (FATF),

11

highlighted that research was

1

Adam, ‘An overview of the regulation of cryptocurrency in South Africa’ (2021) 15 (1)

Pretoria Student Law Review at 371.

2

South African Revenue Service: Crypto Assets & Tax (2022), available at Crypto Assets &

Tax | South African Revenue Service (sars.gov.za), accessed 07 June 2023.

3

Adam, (2021) 15 (1) Pretoria Student Law Review at 377–378

4

Arslanian et al, ‘El Salvador’s law: A meaningful test for Bitcoin’ PWC 2021 at 3.

5

BBC report, ‘Bitcoin becomes off‌icial currency in Central African Republic’ 2022,

available at Bitcoin becomes off‌icial currency in Central African Republic — BBC News,

accessed 07 June 2023; Toti, ‘El Petro Now Legal Tender in Venezuela’ 2023, available at El

Petro Crypto now Legal Tender in Venezuela | Cointext.com (coinjournal.net), accessed

29 August 2023.

6

Act 90 of 1989.

7

South African Reserve Bank: National Payment System Department Position Paper 02 on

Virtual Currencies (2014), available at https://www.resbank.co.za/content/dam/sarb/what-

we-do/f‌inancial-surveillance/general-public/Virtual%20Currencies%20Position%20Paper

%20%20Final_02of2014.pdf at 4, accessed 7 September 2023.

8

A relevant example of such position paper is the Intergovernmental Fintech Working

Group: Crypto Assets Regulatory Working Group Position Paper on Crypto Assets (2021).

9

Act 37 of 2002.

10

Act 38 of 2001. Financial Sector Conduct Authority: Policy Document Supporting the

Declaration of a Crypto Asset as a Financial Product under the Financial Advisory and

Intermediary Services Act (2022), available at Decision-making powers in respect of FSB

Budget (fsca.co.za) at 1, accessed 29 March 2023.

11

The Financial Action Task Force (FATF) is an independent inter-governmental body

that develops and promotes policies to protect the global f‌inancial system against money

laundering and terrorist f‌inancing. Their Recommendations are the global anti-money

laundering (AML) and counter-terrorist f‌inancing (CFT) standard- Kenton, Financial Action

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conducted by the FATF on the characteristics of cryptocurrencies in order

to provide a preliminary assessment of the money laundering risk

associated with its use.

12

The FATF found that criminal risks such as

money laundering are associated with the unregulated use of crypto-

currencies.

13

This was deduced based on the fact that cryptocurrencies

provided for anonymous trade on the Internet; there was insuff‌icient

verif‌ication and identif‌ication of users; there was little clarity regarding

anti-money laundering (AML) compliance; lack of supervision for

cryptocurrency transactions that were concluded across countries; and

that no central body was overseeing cryptocurrency transactions.

14

In February 2023, South Africa was grey-listed by the FATF for not

fully complying with international standards relating to the prevention

of money laundering and terrorist f‌inancing.

15

There is, arguably, a large

possibility that the unregulated use of cryptocurrencies was one of the

factors that led to the grey listing of the country, since cryptocurrencies

are popularly being used to launder illicit money seamlessly. According

to Chainanalysis,

16

Africa has one of the most rapidly growing crypto

markets globally, with cryptocurrency transactions exceeding

$20 billion per month in mid-2021.

17

South Africa has one of the highest

number of users in Africa.

18

Presently, there are approximately

5.8 million South African cryptocurrency users.

19

It is evident that the

use of cryptocurrencies is increasingly growing in South Africa. This, in

turn, necessitates the development of comprehensive regulation.

Financial sectors are faced with a signif‌icant challenge as cryptocurrencies

are increasingly interacting with real-world economies as a method of

payment and their features, such as anonymity, are exploited for money

laundering.

20

Furthermore, cryptocurrencies have become novel and their

Task Force (FATF): What it is, How it Works 2022, available at Financial Action Task Force

(FATF): What it is, How it Works (investopedia.com), accessed 29 August 2023.

12

Financial Action Task Force (FATF) Annual Report 2013–2014, available at FATF

Annual report 2013–2014.pdf, accessed 07 June 2023.

13

Financial Action Task Force (FATF) Annual Report 2013–2014 at 18.

14

Financial Action Task Force (FATF) Annual Report 2013–2014 at 18.

15

FATF: ‘Jurisdictions under increased monitoring’ 24 February 2023, available at

Jurisdictions under Increased Monitoring – 24 February 2023 (fatf-gaf‌i.org), accessed

2 May 2023.

16

Chainanalysis is an American blockchain analysis f‌irm.

17

Fuje et al, ‘Africa’s Growing Crypto Market Needs Better Regulations’ 2022, available at

Africa’s Growing Crypto Market Needs Better Regulations (imf.org), at para 4, accessed

2 May 2023.

18

Fuje et al, (2022) para 4.

19

Malinga, ‘Binance predicts mainstream crypto adoption in SA’ 2023, available at Binance

predicts mainstream crypto adoption in SA | ITWeb, accessed 30 November 2023.

20

Zahudi et al, ‘Regulation of virtual currencies: Mitigating the risks and challenges

involved’ (2016) 5(1) Journal of Islamic Finance at 65.

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THE REGULATION OF CRYPTOCURRENCIES TO COMBAT MONEY LAUNDERING 69

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