The new 'Travel Rule' mandates crypto exchanges to share client information when facilitating crypto transfers above R5 000 as part of its campaign to get SA off the grey list.
 
The change will slow crypto transfer - but in the longer term could attract more institutional investors to crypto. The change will slow crypto transfer - but in the longer term could attract more institutional investors to crypto.
The days of crypto privacy are coming to an end, though many would argue that happened when crypto exchanges enforced Know Your Client (KYC) sign-up rules.
 
A new "Travel Rule" issued by the Financial Intelligence Centre (FIC), which takes effect on 30 April 2025, requires crypto asset service providers (Casps) to collect and share client information when facilitating crypto transfers above R5 000.
 
Even amounts less than R5 000 must be reported if there is a suspicion of money laundering or terrorism financing.
 
Privacy-conscious crypto users may turn to platforms with fewer restrictions or decentralised exchanges (DEXs) that fall outside the rule's scope.
 
The short-term impact of the rule will be to raise the costs of compliance for exchanges, which will have to conduct due diligence on customers' transfers.
 
Longer term, the impact could unlock access to regulated markets and attract institutional investors concerned about crypto's perceived lack of regulatory compliance.
 
This is part of the price of getting SA removed from the Financial Action Task Force grey list. SA was placed on the grey list in February 2023 for failing to meet international standards on money laundering and terrorism financing, and crypto transfers are seen as a point of vulnerability.
 
Also covered under the new rule are crypto transfers destined for "unhosted wallets" where the user - rather than the exchange - has exclusive control of the wallet.
 
Both sending and receiving exchanges must implement effective risk-based policies for crypto transfers destined for wallets.
 
Impact
The Travel Rule is designed to enhance transparency in digital asset transactions and will have a major impact on local exchanges in SA, according to Frank Leonette, CEO of crypto exchange AfriDax.
 
"This new rule will reshape the operational landscape for the crypto industry," he says.
 
"Casps are required to make significant investments in new technologies and infrastructure. Implementing systems to securely collect, verify, and share customer data, including wallet addresses and account details, will be essential.
 
"For many Casp platforms, this will require upgrading existing infrastructure and integrating specialised Travel Rule solutions such as blockchain analytics tools and standardised messaging protocols."
 

The changes required under the new rule will slow crypto transfer and could require manual intervention, which means more manpower will be required by exchanges.
 
Failure to comply with the Travel Rule could result in administrative sanctions under the FIC Act.

Farzam Ehsani, CEO of VALR, the largest exchange in SA by trading volume, says the company must ensure compliance with the laws of the country.
 
"The travel rule is no different and the cost of compliance is certainly increasing. We do believe that changes will ultimately be made to make the Travel Rule more appropriate for the crypto asset industry. We are working with the industry and regulators to try to achieve this."
 
Faadil Moti, CEO of crypto company 80eight, says the new Travel Rule is similar to that adopted in the EU and elsewhere.
 
"Many exchanges have already started complying by registering on TRUST, which is a network that facilitates the secure transmission of required customer information between exchanges during crypto transfers.
 
"While this may initially be seen as disruptive to local exchanges, it is an inevitable standard that all crypto platforms will eventually need to adhere to," says Moti.
 
What type of information?
The Travel Rule requires exchanges and crypto service providers to collect and record basic details of both the sender and receiver of crypto assets - including profile information, account numbers, and wallet addresses.
 
In practice, this means that when a crypto transfer is processed, additional details beyond just the recipient's wallet address will need to be captured, not unlike saving a beneficiary contact when dealing with a bank.
 
Recipients' details required include name, wallet address, and other essential details. These will be "whitelisted", allowing the sending exchange to securely verify and transmit this information to the receiving exchange via networks like TRUST.
 
Moti says many exchanges in SA already have the necessary infrastructure for implementing the new rule.
 
"However, the real challenge may be for smaller crypto companies that lack the resources to comply, potentially raising barriers to entry in the industry."
 
Anonymity
One key consequence of this rule is that crypto transactions will no longer be entirely anonymous. Much like SWIFT payments require sender and receiver details, crypto transfers will now require similar transparency.
 
However, one of the biggest concerns from a regulatory perspective is how exchange control policies will treat this shift.
 
"Transfers to unhosted wallets or offshore exchanges may now be flagged as externalisation, which could significantly restrict industry innovation and hinder the sector's growth in South Africa," says Moti.
 
"My view is that exchange control regulations need a thorough review to evolve alongside technological advancements, ensuring South Africa remains competitive in the global digital asset space.
 
"At present, the framework feels outdated and may limit the industry's potential rather than fostering its development," he adds.
 
It has been done before ...
Says Luno SA country manager Christo de Wit: "Having successfully implemented the Travel Rule in multiple jurisdictions globally, Luno is keenly aware of the challenges that regulators and industry participants face when adopting a compliant solution.
 
"These challenges include selecting an appropriate technical framework and managing the significant time and costs required to build the necessary systems and processes.
 
"While the directive brings South Africa in line with global anti-money laundering and terrorism financing standards, practical implementation hurdles remain, especially with regards to international interoperability between different Travel Rule solutions."
 
Good for trust in the sector
FiveWest CEO Omer Iqbal says the Travel Rule will help to enhance the reputation and legitimacy of the crypto sector.
 
"By increasing transparency and traceability, it strengthens efforts against money laundering and terrorist financing.
 
"Though it introduces additional compliance burdens, slower transactions and potentially a more restricted experience, it also legitimises the industry."
 
He adds that Casps must "proactively implement the Travel Rule and implement the necessary systems, strengthen compliance and train their teams to adapt".
 
"The Travel Rule ultimately reinforces trust and stability in South Africa's crypto market."