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Coin Geek
2 hours ago
- Business
- Coin Geek
How US-China-Russia rivalry is driving blockchain innovation
Getting your Trinity Audio player ready... As the geopolitical fault line between the United States, China, and Russia deepens, it is no longer just a battle for dominance over trade routes, semiconductor supremacy, or artificial intelligence (AI). Beneath the surface of this strategic rivalry lies a quieter but equally disruptive contest. The race to dominate the architecture of tomorrow's digital economy. Blockchain, once a fringe innovation associated mostly with digital currency speculation, is quickly becoming a neutral ground and a battleground for systemic innovation, national resilience, and digital infrastructure autonomy. The friction between these three superpowers is creating pressure and a necessity for critical innovation. As global systems splinter, supply chains decouple, digital payment networks bifurcate, and data ecosystems fracture, blockchain emerges as a tool of self-reliance, accountability, and trustless coordination. For the U.S., blockchain offers a way to secure and verify essential systems in a world where traditional alliances and global flows of information can no longer be taken for granted. Whether in logistics, energy grids, defense contracting, or public record-keeping, decentralized ledgers can provide tamper-evident audit trails, transparent decision-making processes, and the kind of programmable control that rigid legacy databases lack. With increasing concern over cybersecurity threats and surveillance backdoors, especially from foreign-sourced hardware and software, blockchain's trust-minimization properties provide an alternative to simply hardening borders or banning adversarial technology. China, on the other hand, is building blockchain-based systems not only as a means of economic modernization but also as instruments of control, efficiency, and global influence. The digital yuan, supported by its state-backed blockchain infrastructure, is already changing how transactions can be monitored and executed at the national level and across borders. By promoting its Blockchain Service Network (BSN) as a low-cost, interoperable platform, China is quietly exporting the foundations of an alternative Internet architecture that may appeal to other authoritarian regimes or even economically desperate countries seeking low-cost digital public goods. Russia's strategy is distinct but equally calculated. Facing Western sanctions and an increasingly isolated economic position, Russia has turned to blockchain and digital assets as a means of bypassing traditional financial controls. Blockchain enables the Kremlin to conduct international transactions outside the purview of U.S.-dominated systems like SWIFT, providing an economic lifeline. At the same time, Russia is leveraging blockchain to enhance state control, with plans for a digital ruble that can be centrally managed and used in cross-border trade with allied nations outside the dollar's reach. This strategic divergence is driving all three nations to accelerate their blockchain agendas, albeit for different reasons. In the U.S., the private sector and decentralized communities lead the charge, seeking interoperability, openness, and resilience. In China, a centralized but fast-moving state mobilizes its institutions and companies toward efficiency and integration. In Russia, blockchain is a tool of survival and sovereignty, allowing it to sidestep economic isolation while maintaining domestic control. But the shared outcome is the same. Faster adoption, more serious applications, and the rethinking of trust at the infrastructure level. As traditional institutions like SWIFT, Visa (NASDAQ: V), and national identity systems begin to encounter pressure from politically driven fragmentation, blockchain offers a neutral protocol layer that can survive above the fray. Supply chain management, identity verification, cross-border settlements, and data provenance are all domains under scrutiny for their geopolitical vulnerability. Blockchain transforms these systems from black boxes into transparent, programmable networks of records, where verification does not require trust in any single party. Moreover, innovation is often born out of friction. With collaboration stalling between the East and West on technologies like AI regulation, semiconductor access, and cross-border data flows, developers, startups, and governments are increasingly turning to blockchain as a way to design systems that are more sovereign, interoperable, and accountable. Micropayments, decentralized cloud storage, secure voting, and tokenized assets are gaining momentum not as speculative experiments but as practical solutions in a multipolar, mistrustful world. The very fracture that threatens global unity is catalyzing the rise of technologies that may help rebuild trust, but this time through math and code instead of treaties and diplomacy. The blockchain revolution is no longer just about replacing money. It is about replacing the fragile trust models that once held the globalized world together. The deeper the divide between Washington, Beijing, and Moscow, the more urgently the rest of the world will look for infrastructure that does not force a choice between them. Blockchain could be that infrastructure—a neutral layer where neither the United States, China, or Russia can impose absolute control. It is a technological foundation that can rebuild trust in a world of suspicion and fragmentation. The rivalry between these superpowers may be destabilizing, but it is also an accelerant, driving humanity toward a new digital architecture. In this contest, blockchain may become not just a tool of economic strategy but a pillar of global stability. Watch: The most successful organizations are ones with best culture title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
Coin Geek
2 hours ago
- Business
- Coin Geek
Coinbase was hacked by snarky teens; Circle upsizes IPO
Getting your Trinity Audio player ready... Coinbase (NASDAQ: COIN) was aware of its customer data leak far earlier than the digital asset exchange previously acknowledged, while its stablecoin partner Circle is supersizing its initial public offering (IPO) plans. On June 3, Reuters reported that the recently disclosed hack of Coinbase's customer data by customer support staff in India involved the local operation of a Texas-based business process outsourcing firm called TaskUs. In January, at least one TaskUs employee was caught using their phone to photograph Coinbase customer information from a computer screen. Four sources, including three TaskUs staffers, told Reuters that Coinbase was notified immediately of the security breach, and TaskUs promptly fired two staffers involved in the incident. Coinbase responded by cutting ties with TaskUs, resulting in over 200 staff in the city of Indore losing their jobs. The mass layoff was reported in Indian media at the time. And yet, it wasn't until May 15 that Coinbase acknowledged the breach in a filing with the U.S. Securities and Exchange Commission (SEC). Coinbase said at the time that it knew the contractors had improperly accessed customer data in 'previous months' but didn't realize the extent of the breach until May 11, when it received a ransom demand from individuals to whom the data had been forwarded. Coinbase estimated that nearly 70,000 of its customers have been impacted. Coinbase CEO Brian Armstrong later claimed that the exchange began notifying impacted users on April 11 but failed to explain why the SEC wasn't notified until a month later. Crypto journalist Molly White noted that Coinbase revised its user agreement on April 12 to limit customers' ability to participate in class action suits against the exchange. TaskUs has since been hit with a class action suit by Coinbase customers alleging negligence. TaskUs said it 'believes these claims are without merit' and will defend itself in court. Coinbase's customer support is notoriously glacial in its response to complaints, a bad reputation that shows little sign of improvement. Some U.S. customers have resorted to filing complaints with the Consumer Financial Protection Bureau (CFPB) based on its requirements for companies to respond within 15 days. That could explain CEO Armstrong's (incorrect) view that the CFPB is an 'unconstitutional' body that should be 'deleted' because it has 'done enormous harm to the country.' Coinbase has been the subject of over 8,000 complaints with the CFPB, a body that the current federal administration is in the process of dismantling. Insult to injury Fortune reported that Coinbase has used TaskUs services since 2017, but the latter firm's reliance on poorly paid staff in India opens up the potential for staff to supplement their wages with bribes. A TaskUs spokesperson told Fortune that its research suggests the Indore staff who leaked the Coinbase data 'were recruited by a much broader, coordinated criminal campaign against [Coinbase] that also impacted a number of other service providers servicing [Coinbase].' Fortune reported communicating with one of the alleged hackers, who went by the name 'puffy party' on Telegram. This individual claimed to be part of a loosely affiliated group of teenagers and twenty-somethings calling itself 'the Comm' or 'Com' (short for 'community'). This group has been linked to other notable exploits, including the blackmailing of some Las Vegas casino operators in 2023. 'Puffy party' also claimed that members of the Comm/Com perform specific aspects of a heist based on their individual skillsets. One team bribed the TaskUs staff, another performed the social engineering scams, with the spoils divided amongst the teams. In a reflection of this team's juvenile status, 'puffy party' shared screenshots of messages they'd exchanged with what they claimed was a member of Coinbase's security team. The messages show the hackers mocking Armstrong, saying they would use some of the proceeds of their blackmail efforts to 'sponsor a hair transplant so that he may graciously traverse the world with a fresh set of hair.' Back to the top ↑ No KYC, no hacks, no problem Incredibly, the crypto sector's collective response to Coinbase's data hacking scandal is not that the exchange needs to beef up its digital defenses and be more upfront with its customers. Instead, calls are mounting to lift 'know your customer' (KYC) requirements on digital asset operators based on the view that hackers can't steal data that companies don't possess. As some online critics have observed, traditional banks haven't been as supportive as they might of the digital asset legislation currently kicking around Congress because banks 'think it is unfair for a non-bank to do banking without any of the laws and regulations applicable to banks. And they kind of have a point.' Back to the top ↑ Coinbase v Oregon Coinbase responded at the time by claiming that Oregon was 'trying to revive regulation by enforcement,' the catchphrase popularized by digital asset firms that reject nearly all aspects of regulatory oversight with which they disagree. On June 2, Coinbase filed a petition in federal court asking for the suit to be moved out of Oregon and under federal jurisdiction. The petition calls the suit a 'regulatory land grab' and notes that Oregon's Division of Financial Regulation generally takes point on securities transactions, not the AG, calling into question Rayfield's authority to file the suit in the first place. Coinbase VP of legal Ryan VanGrack tweeted Tuesday that the petition was filed because 'the case is fundamentally about federal law.' VanGrack claimed Rayfield's suit 'would undermine recent bipartisan progress towards crypto clarity by creating a patchwork of state regulations that harms consumers, innovation, and economic freedom.' Coinbase's chief legal officer Paul Grewal added that '[b]ecause Oregon's claims raise fundamentally federal issues like the meaning of 'investment contract,' [as defined by the Howey Test] they should be resolved by federal courts.' Back to the top ↑ Circle supersizes IPO Coinbase's share price has ridden a roller coaster so far in 2025, hitting peaks of over $300 in January and troughs of less than half that sum by mid-April. But the company's inclusion in the S&P 500 index last month and the expectation of a major payday from its stablecoin partner Circle currently have Coinbase shares hovering just under $260. USDC-issuer Circle filed its IPO paperwork in early April, and the company has been dotting its i's and crossing its t's in anticipation of that magical Nasdaq debut later this week. On May 27, Circle announced plans to offer 24 million shares of its Class A common stock at an expected range of $24-$26, with Circle offering up 9.6 million of that total and selling stockholders accounting for the other 14.4 million. On June 2, Circle upsized that offer to 32 million shares at a range of $27-$28, allegedly reflecting 'strong investor appetite' for all things crypto under President Donald Trump's second go-round. The IPO is now expected to raise nearly $900 million, while assigning Circle a valuation of up to $7.2 billion. Coinbase holds 8.4 million shares in Circle after converting its equity in the now defunct Centre consortium that originally oversaw USDC's business. Should the IPO go off at the upper end of its expected price range, Coinbase's Circle stock would be worth over $235 million, ~$25 million more than Coinbase's equity in Circle at the time of the conversion. Coinbase is unlikely to be selling much of its Circle stake in order to preserve the sweetheart revenue-sharing deal it worked out when it negotiated its exit from Centre. With both companies now required to issue financial report cards, it seems Coinbase actually makes more money off USDC activity than Circle does, while Circle shoulders most USDC expenses. Last month, reports emerged that Circle was a potential acquisition target of both Coinbase and Ripple Labs, the issuer of the XRP token (as well as its own stablecoin RLUSD). Ripple's offer was said to be in the $4-$5 billion range, which Circle rejected as too low, a view now apparently confirmed by its IPO valuation. (Ripple CEO Brad Garlinghouse recently denied that his company had pursued a Circle deal.) A distinctly contrary view of Circle's prospects was presented in the Financial Times last month. The article called into question Circle's whole business model, as '98 per cent of Circle's revenue is interest on the securities holdings which back its stablecoins … although it issues USDC and holds the offsetting assets, it's not generating revenue from trading or staking transactions involving the stablecoins in either the cryptoverse or the real world.' 'Financially, Circle is a highly levered, uninsured narrow bank with nearly all of its revenue coming from a big bucket of short-term cash investments. It makes money when rates are higher, up to a point, and makes less or loses money when rates are low. That makes Circle a market play on—or a plaything of—volatile short-term interest rates … This then brings us to the unanswerable question at the heart of Circle's business: Does anyone know where short-term interest rates will be in the future?' Back to the top ↑ Coinbase left its keys in San Francisco Coinbase must indeed be feeling flush, as it just announced a deal to lease 150,000 square-feet of new office space in San Franciso. The new space will automatically become the company's single largest geographical footprint and marks a homecoming of sorts for Coinbase, albeit one that's a little hard to fathom. In 2021, as the pandemic forced offices to temporarily close and many tech-firms switched to a remote-first staffing model, Coinbase paid $25 million to break the lease on its former San Francisco office space. At the time, the move was pitched as the company embracing a 'no headquarters' philosophy but it seems times (and philosophies) have changed. CEO Armstrong tweeted that Coinbase was 'excited to reopen an office in SF,' adding that the company 'never left California' as many of its employees live in the state and '[w]e go to where the talent is.' Addressing San Francisco Mayor Daniel Lurie, who was elected last year, Armstrong said the city was 'so badly run for many years, but your excellent work has not gone unnoticed.' Rival exchange Kraken also shut its SF headquarters in 2022 because founder/then-CEO Jesse Powell believed the city was 'not safe.' Efforts to reduce the city's crime rate got a potential boost from Ripple co-founder Chris Larsen, whose nonprofit group San Francisco Police Community Foundation has offered the SF Police Department a $9.4 million donation to improve the SFPD's Real Time Investigation Center. The gift comprises a $2.15 million retroactive lease of office space and $7.25 million worth of new toys, including nearly $5.3 million in drone surveillance gear. Larsen, a San Francisco native, previously donated millions to expand the city's security camera network, but controversies surround how some of these funds were allocated. Mayor Lurie has indicated he's in favor of allowing the police to accept the donation. We suspect Coinbase's Armstrong is, as well. After all, there's some dangerous teenagers out there who've put a target on his head. Back to the top ↑ Watch: Teranode is the digital backbone of Bitcoin title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
Coin Geek
a day ago
- Business
- Coin Geek
Japan's bold move: Reclassification for safer digital economy
Getting your Trinity Audio player ready... Japan's decision to reclassify digital currencies as financial products is a transformative move that has the potential to revolutionize the country's digital finance landscape. By recognizing digital assets as financial products under the Financial Instruments and Exchange Act (FIEA), the Financial Services Agency (FSA) is taking a bold step toward enhancing investor protection, increasing transparency, and fostering a more robust digital asset ecosystem. At the heart of this reclassification is a commitment to investor protection. For too long, the digital asset market has been a Wild West, with bad actors exploiting regulatory gaps to engage in market manipulation, insider trading, and other fraudulent activities. By bringing cryptocurrencies under the FIEA, the FSA aims to ensure that digital assets are subject to the same stringent rules as traditional financial instruments like stocks and bonds. This means greater oversight, stricter disclosure requirements, and tougher penalties for misconduct. One of the most significant benefits of this move is the enhanced regulation of digital currency exchanges. These platforms are the primary gateways through which investors access digital assets, but they have historically been prone to security breaches, mismanagement, and fraud. Japan has experienced this firsthand with high-profile incidents like the Mt. Gox collapse and the Coincheck hack, where investors lost millions due to poor security and oversight. By subjecting exchanges to stricter regulatory standards, the FSA is creating a safer environment for investors. Exchanges will be required to maintain robust security protocols, conduct regular audits, and ensure compliance with know-your-customer (KYC) and anti-money laundering (AML) regulations. This will not only protect investors but also help restore confidence in the market, attracting more institutional participants who were previously wary of the industry's lack of safeguards. Moreover, the reclassification could lead to significant tax reforms that benefit investors. Currently, digital currency gains in Japan are taxed as miscellaneous income, with rates reaching as high as 55%. By recognizing digital assets as financial products, the FSA could pave the way for treating digital asset gains as capital gains, which are subject to a flat tax rate of 20%. This would make digital asset investments more attractive, encouraging broader participation in the market. Another positive aspect of this shift is that it could drive the industry toward greater utility and usability. For too long, the focus of many digital currency projects has been on speculation rather than real-world value. With stricter regulations in place, exchanges and digital asset firms will be encouraged to prioritize security, transparency, and practical use cases over mere hype. This could lead to a new wave of innovation as companies strive to develop blockchain applications that deliver tangible benefits to consumers and businesses. The increased oversight could also help Japan establish itself as a leader in blockchain innovation. As exchanges and other digital asset platforms are forced to adhere to global best practices, they will become more competitive on the international stage. Japanese firms that survive the regulatory shakeout will be those that can demonstrate real-world value, offering services that go beyond simple trading. This could include blockchain solutions for payments, digital identity verification, supply chain tracking, and even decentralized finance (DeFi). Yet, this transformation will not be without challenges. Smaller digital asset firms, which have thrived in a relatively unregulated environment, may struggle to comply with the new rules. Legal fees, licensing requirements, and ongoing reporting obligations will increase their operational costs, potentially driving some startups out of the market. However, this is not necessarily a negative outcome because it signifies market maturation. Just as with traditional finance (TradFi), only the strongest, most reliable firms will thrive under stricter oversight, creating a safer environment for investors. Critics may argue that increased regulation will stifle innovation, but this perspective ignores the reality that sustainable innovation requires a secure and trustworthy foundation. A market-driven purely by speculation is a bubble waiting to burst, but one grounded in transparency, investor protection, and real-world utility is far more resilient. Japan's regulatory shift is an opportunity to transition from the Wild West of crypto speculation to a mature, well-regulated industry that can support long-term growth and adoption. Ultimately, Japan's decision to reclassify cryptocurrencies as financial products is a recognition of the growing importance of digital assets in the global financial system. It is a move that will protect investors, enhance market integrity, and drive the industry toward greater usability and innovation. While the transition may be challenging for some firms, it is a necessary step in the evolution of the digital currency market. By leading the way in regulatory innovation, Japan has the opportunity to become a global hub for blockchain technology and digital finance. Watch: It's time for regulation to enable blockchain growth title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
Coin Geek
2 days ago
- Business
- Coin Geek
Global digital asset ownership rises in 2025, UK leading
Getting your Trinity Audio player ready... Global digital asset adoption is growing in 2025, with the United Kingdom leading the way in increasing ownership among its population. This is according to a new study by Gemini, who attributed the increase, in part, to the influence and policies of United States President Donald Trump. Gemini, the U.S.-based digital asset exchange founded by the Winklevoss brothers, released its latest 'State of Crypto' report on May 27, offering a breakdown of investor awareness around digital currencies, motivations for owning and trading, and global adoption rates. Based on a survey of 7,205 adult consumers across the U.S., Europe, Singapore and Australia (approximately 1,200 consumers per country), the report found that global adoption of digital assets is growing across all areas, with ownership increasing fastest in Europe. In 2024, one in five (21%) respondents in the U.S., U.K., France, and Singapore reported owning digital assets. In 2025, that figure grew to nearly one in four (24%). The U.K. saw the biggest year-on-year growth in ownership of the surveyed nations, with the share of respondents indicating digital asset holdings rising from 18% last year to 24% as of April. For comparison, 21% of French respondents reported owning digital assets in 2025, up from 18% in 2024, while in the U.S., the number grew from 21% to 22%. However, while the U.K. has reportedly seen the most notable increase in new owners, it is still not the world's top nation for digital asset ownership. According to the report, Singapore has been the top country globally for digital asset ownership in the past two years, with 26% of local respondents surveyed last year saying they were invested in digital assets, up to 28% this year. Global growth due to Trump In part, Gemini attributed the global growth to the Trump Administration's approach to digital assets. 'Since coming into office in January 2025, President Trump has established a Strategic Bitcoin Reserve for the United States, appointed SEC leadership that has displayed a more favorable approach to digital assets, and expressed support for bills that will provide stablecoin legislation and a regulatory framework for digital assets,' said Gemini. 'Survey results suggest that these policies are inspiring interest in the industry among non-owners—those who have never invested in crypto.' The company added that understanding and winning over this latter group of potential investors 'will drive significant growth for the industry, which has experienced relatively flat adoption over the past few years.' In this regard, nearly a quarter (23%) of U.S. non-owners surveyed said that the President's launch of a Strategic Bitcoin Reserve increased their confidence in the value of digital assets. This sentiment was echoed globally by non-owner respondents in the U.K. and Singapore, where about one in five (21% and 19%, respectively) said the same. 'The United States has proven itself as a global leader in Web3 and blockchain technology with the addition of Trump's pro-crypto policies, which is a significant change from the previous Administration,' said Marshall Beard, Chief Operating Officer at Gemini. 'With this pro-innovation approach, the crypto industry is positioned for significant growth in the United States and around the world.' Trump has also been in the headlines recently for his more controversial links to the digital asset space, specifically his dabbling in memecoins with the $TRUMP memecoin. Gemini suggested that the memecoin market and the veneer of legitimacy provided by Trump's involvement may play a part in the growth of global digital asset investment. The report found that in the U.S. 31% of investors who own both memecoins and traditional digital assets reported that they purchased their memecoins first, followed by 28% in the U.K. and Australia, 23% in Singapore, 22% in Italy, and 19% in France. For Gemini, this indicated that 'memecoins likely drove crypto adoption… globally, 94% of memecoin owners also own other types of crypto, suggesting memecoins are an onramp to crypto for many investors around the globe.' Outside of Trump's influence, another key finding of the survey showed a boost in digital asset ownership in the U.S. following the approval of spot crypto ETFs in early 2024, with 39% of surveyed investors reportedly now owning crypto ETFs, up from 37% in 2024. Regulatory influence and the UK rise While Trump's pro-crypto policies appear to spur global adoption and investment, the impact of regulation appears less clear. Adoption grew notably in both the EU and U.K., two very contrasting regulatory environments. Gemini suggested this growth in the EU and U.K. reflected 'a warming regulatory environment for digital assets in Europe.' However, while the EU's Markets in Crypto Assets (MiCA) Regulation has been broadly praised as a comprehensive and forward-thinking framework specifically tailored to digital assets, the U.K. has yet to adopt a national regulatory framework for digital assets. Meanwhile, Gemini's head of Europe, Mark Jennings—in an interview reported by Cointelegraph—suggested that the U.K.'s sharp spike in digital asset ownership, despite its lack of a MiCA-style regulatory framework, could be down to a combination of the country's status as a 'central financial hub for many decades' and the outside influence that MiCA would likely have on adjacent countries. In April, the U.K. government published a draft regulation that would bring digital asset exchanges, dealers and agents under the U.K.'s financial services regulatory regime. At the same time, Chancellor of the Exchequer Rachel Reeves indicated that the U.K. planned to more closely align with the Trump 2.0-era approach to supporting innovation across the digital asset industry. While the U.K. waits for its final regulatory framework for digital assets, which the Treasury is expected to finalize later this year, it appears investors are undeterred by the uncertainty, in keeping with a global trend towards increased digital asset ownership in 2025. Watch: Streaming with NFTs changes idea of ownership title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
Coin Geek
5 days ago
- Business
- Coin Geek
South Africa: Digital assets not subject to forex controls
Getting your Trinity Audio player ready... Digital assets are not capital or currency and are not covered by South Africa's foreign exchange controls, a local court has ruled. The high-profile court case pitted Africa's largest lender, Standard Bank (NASDAQ: SBGOF), against the South African Reserve Bank (SARB) and a local firm, Leo Cash & Carry (LCC). The central bank had seized over $1 million held in a Standard Bank account by the firm, which had been declared insolvent. Standard had placed a hold over the funds as the client owed an overdraft facility extended years ago. However, the central bank declared the funds in the account as forfeited to the state as, before it collapsed, LCC had purchased $37 million worth of BTC and transferred it abroad without official authorization, breaching forex laws. Standard Bank's legal team argued that 'crypto' is neither currency nor legal tender in South Africa, so the Exchange Control Regulations didn't apply. In his ruling, Judge M.P Motha sided with Standard Bank, and according to him, 'The answer lies in one's interpretation of the word currency.' 'Cryptocurrency is not money. The construction that cryptocurrency is money, by looking at the definition of money which includes foreign currency, is strained and impractical,' the Pretoria High Court judge ruled. The judge further ruled that 'crypto' 'falls outside the ambit of capital.' The judgement means that any flow of digital assets outside South Africa does not fall within the scope of the country's 'austere exchange control framework – at least for now,' says the local division of American law firm Baker McKenzie in its analysis. Wiehann Olivier, the head of digital assets at consulting firm Forvis Mazars, concurs, noting that the ruling creates a loophole that allows unlimited external transfers of digital assets. 'Currently, you can externalize as much cryptocurrency without any limitation as imposed from the exchange control perspective,' he told local outlet Moneyweb. 'Regulators will act swiftly' The loophole creates an easy workaround for South Africans seeking to move their money offshore. It also plays into the narrative that global central banks have held for years: that digital assets are used to circumvent capital controls, making them susceptible to abuse and criminal use. Experts expect the South African Reserve Bank to act swiftly and fix the flaw in its system. 'Given the risk this presents to the exchange control system as a whole, such legislative action seems inevitable, and it is likely that the Exchange Control Regulations will be amended in short order,' Baker McKenzie says. Olivier believes that even the central bank wasn't aware of the grey area, otherwise it would have plugged the loophole. 'In the background, [SARB] will most likely be making amendments to the exchange control regulations going forward, probably in the next 12-18 months because of the significance of the fact that you can externalize so much money without oversight,' he stated. The primary factor that supported the ruling is that the SARB, like most other central banks, has clarified that digital assets are not legal currencies. Even in pro-crypto nations like Russia, digital asset payments remain prohibited. This oversight could prove costly for South Africa as residents could purchase digital assets en masse and use them to send money offshore unchecked. The need for digital asset regulations in South Africa South Africa has the continent's most advanced digital asset laws, which has allowed regulators to issue licenses to over 200 VASPs. However, the ruling has exposed some of the gaps that still exist. In his ruling, Judge Motha noted that at this point, regulators could no longer claim digital assets as a nascent sector as their defense. 'Cryptocurrency has been in existence for over 15 years, one cannot say SARB has been caught napping,' the judge noted. Desiree Reddy, the South African director at global law firm Norton Rose Fulbright, noted, 'The decision underscores the pressing need for legislative reform to provide clarity and certainty in this rapidly evolving area.' Watch: Tech redefines how things are done—Africa is here for it title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
