South Africa is investigating fintech and crypto firm Kastelo over suspected exchange control violations involving about R3.5 billion in transactions.
Finance Minister Enoch Godongwana confirmed the investigation in a recent parliamentary response. He said the South African Reserve Bank (SARB) had identified a reasonable suspicion of exchange control contraventions.
The case centres on transactions that allegedly used clients’ foreign exchange allowances to move funds offshore. The money was allegedly used to acquire crypto assets abroad before being sold through local crypto-asset service providers.
However, the investigation is still ongoing. The figures remain subject to its findings.
Kastelo Faces South African Reserve Bank Investigation
The SARB began its investigation around October 2025.
The initial investigation focused on transactions conducted between 4 August and 21 November 2025. Godongwana said the scope could expand if investigators identify additional transactions.
The central bank suspects foreign exchange transactions worth about R4 billion breached South Africa’s Exchange Control Regulations.
Of that amount, approximately R3.496 billion involved clients’ Foreign Investment Allowances (FIAs). Another R6.688 million involved Single Discretionary Allowances (SDAs). Together, those figures total about R3.503 billion.
The distinction is important.
The R3.5 billion figure refers to the specific suspected transactions involving the two allowances. The broader SARB suspicion is approximately R4 billion.
How the Alleged Crypto Transactions Worked
At the centre of the case is Kastelo’s crypto arbitrage business.
Crypto arbitrage involves buying a digital asset where it is cheaper and selling it where the price is higher. Kastelo has said its model allowed clients to benefit from price differences between South African and international cryptocurrency markets.
According to the SARB allegations, however, clients’ foreign exchange allowances were used to externalise funds.
The funds were allegedly converted into foreign currency and used to acquire crypto assets outside South Africa. Those assets were then sold through local crypto-asset service providers.
The SARB also suspects that the benefit of some transactions accrued to Kastelo rather than the clients.
Kastelo has rejected allegations that it misused clients’ allowances. The company says clients invested their own money for their own benefit and that Kastelo provided administrative services for a fee.
Foreign Investment Allowances Are at the Centre
South Africa allows residents to use foreign exchange allowances for certain offshore investments.
The Foreign Investment Allowance allows eligible South African residents to transfer up to R10 million offshore per calendar year, subject to the applicable requirements. The Single Discretionary Allowance provides a separate annual allowance for individuals.
The SARB’s concern is not simply that clients moved money abroad.
Instead, investigators are examining whether Kastelo used clients’ allowances to facilitate transactions for its own benefit.
The central bank has also questioned whether some clients understood how their allowances were being used.
SARB Raises Questions About Offshore Accounts
Godongwana confirmed that investigators identified cases where clients allegedly did not know that foreign bank accounts had been opened in their names.
He said whether those clients actually knew about the accounts remains part of the investigation.
That issue could become significant because the investigation is examining who controlled the funds and how transactions were conducted.
The SARB has also raised concerns about Kastelo’s use of client allowances and the structure of its crypto arbitrage model.
Kastelo’s Bank Reported Suspicious Transactions
The investigation also followed concerns raised by Kastelo’s authorised dealer, Access Bank.
A High Court judgment recorded that Access Bank conducted a forensic review and reported suspicious transactions to the SARB. The bank subsequently faced the question of whether it should continue its relationship with Kastelo.
The SARB later issued a blocking order against funds held in Kastelo’s Access Bank account.
The order was issued in November 2025.
In July 2026, the Gauteng High Court in Johannesburg dismissed Kastelo’s challenge to the blocking order and ordered the company to pay the SARB’s legal costs.
However, the court did not make a final finding that Kastelo had committed the alleged exchange control violations.
The judgment dealt with whether the SARB had reasonable grounds to issue the blocking order while its investigation continued.
Investigation Could Lead to Further Action
Godongwana said the SARB will determine whether the matter should be referred to law enforcement or other regulatory authorities once its investigation is complete.
He also confirmed that administrative action had already been taken to preserve approximately R15 million connected to Kastelo.
That means the current investigation should not be treated as a completed enforcement case.
Authorities are still determining the full scale of any potential violations and whether further regulatory breaches occurred.
South Africa Is Tightening Crypto Exchange Controls
The Kastelo investigation comes as South Africa reviews how its exchange control framework applies to crypto assets.
National Treasury and the SARB published draft Capital Flow Management Regulations, 2026, which are intended to strengthen the authorities’ ability to detect, deter and disrupt illicit financial flows.
The proposed framework also addresses concerns around crypto assets and cross-border transactions.
This is significant because South Africa’s existing crypto regulatory system has largely focused on licensing, financial crime controls and market conduct.
The new capital-flow framework adds another layer to the oversight of crypto transactions involving funds moving across borders.
Kastelo Defends Its Business Model
Kastelo has disputed the SARB’s interpretation of its business model.
The company says its service allowed clients to access international crypto arbitrage opportunities that would otherwise be difficult for ordinary investors to use.
It also says clients received the necessary information and agreements before participating.
Kastelo further stated that it stopped offering the arbitrage service after the SARB’s blocking order.
The company maintains that the investigation should not be treated as proof that it breached the law.
What the R3.5 Billion Investigation Means for Crypto
The case highlights a growing regulatory issue for South Africa’s crypto market.
Crypto transactions can move across borders quickly. However, the fiat money used to enter and exit those transactions remains subject to national financial rules.
That creates a regulatory question when crypto firms use established foreign exchange allowances to facilitate international digital-asset activity.
The Kastelo case could therefore influence how South African regulators view crypto arbitrage, offshore transfers and the use of individual investment allowances.
It could also affect how crypto firms structure cross-border services in the future.
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Editorial Takeaway
The R3.5 billion Kastelo investigation is significant because it sits at the intersection of crypto, foreign exchange and South Africa’s capital controls.
The SARB has identified a reasonable suspicion of exchange control violations, but the investigation has not reached a final conclusion. The R3.5 billion figure also remains subject to the outcome of the investigation.
For crypto businesses, the case highlights the importance of understanding the rules that apply beyond digital assets themselves.
Moving money into crypto does not remove the foreign exchange obligations attached to the underlying funds.
As the SARB continues its investigation, the final findings could provide important guidance on how South Africa treats crypto arbitrage and cross-border digital-asset transactions under its exchange control framework.
