Dawie Roodt warns the South African government about the rand

The South African government risks encouraging individuals to increasingly use stablecoins to bypass the traditional banking system and the country’s onerous exchange controls. 

This will result in fewer and fewer people using the rand, with the National Treasury’s proposed changes to its Capital Flow Management Regulations likely to accelerate the trend. 

Efficient Group chief economist Dawie Roodt shared this warning in a recent interview on BizNews, where he argued that the National Treasury does not understand modern technology.

This comes after the National Treasury published its draft of the regulations in April, where it was revealed that the state could force individuals to sell their crypto assets. 

The inclusion of this provision was met with sharp criticism in public by crypto exchanges and investors alike, with the National Treasury coming out to defend its proposal. 

It explained that the draft regulations do not criminalise the possession of crypto assets, with it calling concerns about the regulations “misplaced”. 

Under the proposed regulations, South African residents who obtain possession of, or the right to sell, these assets exceeding a specified threshold must declare and offer to sell them to the National Treasury or an authorised dealer within 30 days.

This “determined threshold” will be set by the Finance Minister, while the amount payable for the assets will be fixed by the Treasury or an authorised person.

Notably, the amount cannot be below the asset’s market value and must be paid out in South African rand.

Despite this explanation, Roodt said the government’s actions show that it does not understand the nature of the technology it is trying to regulate. 

“It just goes to show that the people who made these proposals simply do not understand what they are talking about,” Roodt said. 

“They are clueless about the nature of this technology and how it bypasses traditional financial oversight.” 

Roodt explained how an individual can use a ‘cold wallet’ to store their cryptocurrencies or assets in a way that is not connected to the internet or the traditional financial system.

“How are they going to get their hands on that? They will have to force me to hand over my passwords and open my computer and sell my crypto at a price they determine,” Roodt said. 

“Don’t these people understand that the world has moved forward and that there are new technologies available? They cannot stop this and me.” 

Crypto users kiss the rand goodbye

The increasingly onerous regulations placed on crypto and foreign exchange in South Africa are likely to result in rising interest in the technology. 

As it becomes increasingly difficult to comply with regulations in the traditional finance sector, individuals will look for alternatives to bypass them. 

Cryptocurrencies offer one such alternative that is already available and in widespread use, which should force the government to tread carefully. 

“These are not normal ‘rands’ or currencies that we are talking about, that are forced to go through the banking system,” Roodt said. 

“This is new technology, and the state does not have power over people any more. That means you have to get rid of foreign exchange regulations altogether.” 

“This is because if you don’t, I will stop using the rand completely and go to some other technology and use other currencies.” 

Roodt explained that he would not be the only one, with a significant number of South Africans being increasingly willing to use this new technology. 

The government’s willingness to push South Africans towards these new technologies, even if inadvertently, shows that it does not understand how much things have changed. 

“It is very clear to me they do not understand what they are doing. More importantly, we can see what the intentions behind this are,” Roodt said. 

“We can understand the ideology behind it. The ideology is that they want to control everything, but the nature of the technology is that it cannot be controlled.” 

Roodt did admit that the new technologies can be used for criminal activity, such as buying drugs or funding a terrorist organisation, without being flagged. 

However, he argued that this can be policed through other means and the potential benefits of the technologies far outweigh the negative effects.