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SA Regulators Preventing Crypto Payments from Replacing Legacy NPS

5 min read

Last week, the South African Reserve Bank and the FSCA issued a joint communication declaring that crypto assets are not money, not legal tender, and not payments under the National Payment System Act. That sounds like clarity. But look closer and the picture gets murkier. The regulators explicitly frame crypto as a threat to the national payment system — warning of "parallel, unregulated, and fragmented payment systems" — while keeping full KYC and travel rule compliance on every CASP transaction. So crypto isn't a "payment" according to the SARB, but the compliance burden on payment-facilitating CASPs hasn't changed. Meanwhile, the rest of Africa isn't waiting for regulators to figure it out: Sub-Saharan Africa recorded $205 billion in stablecoin-linked on-chain value last year, up 52%.

Key Takeaways:

  1. The SARB and FSCA confirmed on May 29 that crypto falls outside the National Payment System Act — but CASPs facilitating crypto payments still need FAIS licences and full travel rule compliance on every transaction.
  2. The joint communication explicitly frames crypto as a threat to the NPS — citing "parallel, unregulated payment systems," "dollarisation" risk from stablecoins, and potential "risks to financial stability."
  3. Africa's stablecoin volumes surged 52% to $205 billion (R3.3 trillion) — African fintechs are building the cross-border payment infrastructure that regulators are still trying to classify.

What the Joint Communication Says — and What It Doesn't

The joint communication, issued May 29, makes three things explicit. Crypto assets — including stablecoins — are not money or funds under the National Payment System Act. They are not legal tender under the SARB Act. And crypto used for payments falls outside NPS regulation.

Peer-to-peer transactions — sending Bitcoin directly to someone with no intermediary — don't require a licence. That part is genuinely clear.

But here's where it gets complicated. Any business facilitating crypto payments for customers — exchanges, payment gateways, custody providers — still needs a FAIS licence as a CASP. Crypto payment providers are currently operating under this FAIS framework rather than under the National Payment System, effectively an exemption from payment system regulation. The FSCA has approved 300 CASPs since licensing began in June 2023, declined 14, and is running 81 active investigations against unlicensed operators.

The Regulators Said the Quiet Part Out Loud

The joint communication doesn't just classify crypto outside the payment system — it explicitly frames crypto as a threat to it. The regulators warn of the "possible emergence of parallel, unregulated, and fragmented payment systems if crypto assets were to gain widespread adoption." They argue the NPS could become "less efficient because many crypto assets do not offer interoperability or central clearing." They cite "operational and cybersecurity risks, including fraud, cyberattacks and extortion, as well as possible risks to financial stability."

Read that again: "parallel payment systems." The regulators are explicitly acknowledging that crypto could replace the existing NPS — and declaring that they intend to prevent it. Foreign-currency stablecoins like USDC and USDT are singled out as a "dollarisation" risk that could weaken monetary policy. Unbacked crypto like Bitcoin is dismissed as "speculative" and "unsuitable for payment purposes." The message is clear: crypto payments are a competitive threat to the legacy payment system, and the regulatory response is to ensure they never gain enough traction to become one.

The Travel Rule and KYC Haven't Gone Anywhere

The SARB can call crypto "not a payment" all it wants. The Financial Intelligence Centre's Directive 9 — South Africa's implementation of the FATF travel rule — still applies to every single crypto transaction that passes through a CASP, regardless of value.

That means any business accepting Bitcoin through a payment processor still needs to provide originator and beneficiary information. For transactions above R5,000, full data collection and verification are mandatory. Below R5,000, a reduced data set is required — but the obligation still exists.

The FSCA may have reclassified the transaction, but Directive 9 remains in full force regardless of that treatment — and it's technically the minimum requirement. CASPs still need full KYC on every customer they do business with, including a declared source of funds. Knowing who the funds are coming from and going to is the core of AML risk management — and declaring something "not a payment" does not null and void that obligation. Until the FSCA explicitly declares that travel rule and KYC requirements are exempt for payment-facilitating CASPs, the current understanding remains: all CASPs, whether facilitating payments or not, must know their customer and maintain full AML measures.

Africa Isn't Waiting for Clarity

While South African regulators draw definitional lines, the rest of the continent is building. Sub-Saharan Africa recorded roughly $205 billion (about R3.3 trillion at R16.31/$) in stablecoin-linked on-chain value from mid-2024 to mid-2025 — a 52% year-on-year surge.

Five African companies — Flutterwave, M-PESA, MTN's MoMo, Mukuru, and Onafriq — made the 2026 global Cross-Border Payments 100 list alongside Visa and PayPal. Onafriq is already using USDC for treasury settlement, bypassing the $5 billion in annual friction that correspondent banking imposes on the continent.

The cross-border payment market in Africa could triple to $1 trillion by 2035. Stablecoins and crypto rails are driving that growth — enabling faster, cheaper transfers between wallets, banks, and mobile money systems across borders. This is happening regardless of whether any regulator classifies it as a "payment" or not.

What This Means for South Africans

The practical takeaway: you can hold Bitcoin (currently at $68,000 — about R1.1 million per coin). You can send it peer-to-peer without a licence. You can trade through any of the 300 licensed CASPs. The rules are at least written down, which puts South Africa ahead of most countries.

There is a further consequence. Because crypto is explicitly not treated as money for payment purposes, every time you use it to pay for something, you are disposing of an asset — not spending money. That disposal is a taxable event. SARS treats crypto as an asset, which means using Bitcoin to buy a cup of coffee triggers a capital gains calculation on the difference between your acquisition cost and the value at the point of sale. This is another layer of friction that makes everyday crypto payments impractical for both consumers and businesses.

But here is the uncomfortable truth. By explicitly declaring crypto outside the payment system while keeping full KYC and travel rule requirements on every CASP transaction, regulators have effectively made crypto payments dead on arrival for everyday use. No regular consumer is going to volunteer their KYC information to pay for a coffee at the local shop — not when a tap of their bank card or phone offers infinitely more convenience. Consumers are primarily convenience-driven, and any regulatory friction imposed on crypto payments acts as an impenetrable moat protecting existing non-crypto-based payment methods. The friction is so heavy that it renders crypto as a day-to-day payment mechanism unworkable for businesses. By declaring this is "not a payment" under their purview, the regulators are in practice destroying the crypto payment industry before it can get started. Africa's $205 billion stablecoin economy will keep growing — the question is whether South African businesses will be part of it, or regulated out of it.

Sources:

Leon Kowalski