Stablecoins Let South Africans Circumvent Capital Controls, Worrying Regulators

The South African Reserve Bank (SARB) has elevated crypto assets and stablecoins to a formal financial-stability risk category, citing their potential to undermine the country's regulatory and capital-control frameworks. In its latest Financial Stability Review (FSR), the central bank highlighted the rapid adoption of digital assets, with crypto trading platforms now serving 7.8 million users and holding $1.5 billion in custody as of July 2025 according to Bloomberg. This surge reflects a structural shift in trading behavior, as USD-pegged stablecoins have overtaken Bitcoin and other volatile cryptocurrencies as the preferred trading pairs on local platforms according to Bloomberg.

The SARB attributes the rise of stablecoins to their lower price volatility compared to unbacked crypto assets, which has made them a favored tool for circumventing South Africa's Exchange Control Regulations. These rules, designed to monitor capital inflows and outflows, currently lack explicit coverage of digital assets, creating a regulatory gap. "The borderless nature of crypto assets allows users to bypass exchange controls," said Herco Steyn, the central bank's lead macroprudential specialist according to Bloomberg. Stablecoin trading volumes, which stood at less than 4 billion rand in 2022, surged to nearly 80 billion rand by October 2025, underscoring the scale of the challenge according to Bloomberg.

The central bank and National Treasury are jointly developing a framework to regulate cross-border crypto transactions and amend exchange-control laws to bring digital assets under surveillance according to Bloomberg. However, progress remains incomplete, leaving authorities with limited visibility into reserves, liquidity, or stablecoin issuers. The Financial Stability Board (FSB) noted in October 2024 that South Africa has "no framework in place" for global stablecoins and only "partial regulations" for crypto assets according to Moonstone. Without timely action, SARB warns that risks could accumulate undetected, amplifying financial shocks in a high-debt economy.

The FSR also identifies broader structural vulnerabilities, including South Africa's highly concentrated financial sector and geopolitical uncertainties. Nicola Brink, head of the SARB's financial stability department, emphasized that while crypto is a key focus, other risks-such as persistent economic stagnation and climate change-also threaten long-term resilience according to Moonstone. The central bank's improved financial stability outlook, driven by lower inflation and stronger investor sentiment, contrasts with the urgency of addressing crypto-related gaps.

South Africa's crypto ecosystem is dominated by platforms like Luno, VALR, and Ovex, which account for most trading activity. Despite regulatory efforts, the sector's growth outpaces oversight, with over 300 entities applying for licenses under the Financial Sector Conduct Authority's 2022 framework according to CoinPaprika. SARB anticipates regulatory developments by 2026 but cautioned that delays could exacerbate risks. Meanwhile, global volatility-Bitcoin dropped to $87,000 from a $126,000 peak in October-has further complicated the landscape according to FXStreet.

As stablecoin adoption expands, regulators face the dual challenge of fostering innovation while safeguarding financial stability. The SARB's warnings signal a pivot toward proactive oversight, balancing the potential of digital assets with the need to mitigate systemic risks.