South African fintech company Kastelo is facing scrutiny from the South African Reserve Bank (SARB) over approximately R4 billion in foreign currency transfers that the central bank says raise questions about compliance with the country’s exchange control regulations. The investigation centres on Kastelo’s crypto arbitrage business model, which allowed clients to use South African foreign exchange allowances to fund cryptocurrency purchases offshore before bringing the digital assets back to the local market.
The R4 billion figure does not represent money that SARB has alleged was stolen or simply disappeared. It refers to foreign currency that the central bank’s Financial Surveillance Department identified as having moved offshore through transactions associated with Kastelo’s business model. A July 2026 Johannesburg High Court judgment found that SARB had reasonable grounds to suspect an exchang control contravention, while the underlying regulatory investigation continues.
Kastelo, a Cape Town based fintech, has disputed SARB’s characterisation of its business. The company has maintained that clients understood the service, signed mandates and participated voluntarily, while the crypto assets and resulting proceeds ultimately returned to South Africa. The company has also argued that it acted as an intermediary rather than using clients’ allowances for its own benefit.
How Kastelo’s Crypto Arbitrage Model Worked
Kastelo’s business model centred on cryptocurrency price differences between offshore and South African markets. When a digital asset traded at a lower price on an international exchange than on a South African exchange, the model could convert rand into foreign currency, purchase the cryptocurrency offshore, transfer it back to South Africa and sell it locally at the higher price after accounting for costs. The profit could then be shared with the client after Kastelo’s charges or interest.
The structure relied on South Africa’s foreign exchange allowances. Under the Single Discretionary Allowance, an individual can transfer up to R1 million abroad annually, while the Foreign Investment Allowance allows up to R10 million subject to the applicable requirements, including tax clearance. SARB’s case focuses on whether Kastelo effectively aggregated or accessed these individual allowances on a scale that transformed them into a mechanism for its own crypto trading operations.
According to an affidavit from SARB Financial Surveillance Department investigator André Malherbe, Kastelo had 891 clients whose allowances represented approximately R891 million in individual SDAs and R8.9 billion in individual FIAs over an annual cycle. SARB alleged that the funds were converted into foreign currency and transferred offshore to acquire crypto assets. The affidavit stated that approximately R4 billion had moved offshore during 2025.
SARB also raised questions about whether some clients understood how their allowances were being used. The central bank alleged that clients may have received incentives for allowing Kastelo to access their allowances and that some clients might not have known that offshore bank accounts had been opened in their names. SARB further alleged that Kastelo’s compliance declarations did not accurately represent how the business operated.
SARB’s Allegations and Kastelo’s Response
The central dispute concerns whether Kastelo’s use of clients’ foreign exchange allowances complied with South Africa’s exchange control framework. SARB argued that the dominant purpose of the structure was to obtain foreign currency for Kastelo’s benefit through third parties and that this could circumvent the restrictions governing the export of capital. The central bank also argued that later repatriation of funds did not remove the exchange-control concerns because the regulations seek to protect South Africa’s foreign currency reserves.
Kastelo has rejected the allegations and argued that its clients understood the arrangement. The company said customers watched compulsory educational videos, signed mandates and participated in the crypto arbitrage strategy knowingly. Kastelo also argued that its transactions did not permanently externalise client capital because the crypto assets and proceeds returned to South Africa. Moneyweb reported that Kastelo maintains it did not violate the exchange control rules and had obtained legal advice supporting its position.
The dispute also involves Kastelo’s use of financing. SARB raised concerns about possible loans or incentives that could allow clients to access their foreign exchange allowances even when they lacked sufficient funds. Earlier court records describe a model in which qualifying clients could receive loans, while Kastelo said its lending complied with the National Credit Act.
The central bank issued a blocking order against a Kastelo bank account in November 2025. The order froze funds in the account while SARB investigated the suspected exchange-control violations. The amount blocked in the account was far smaller than the R4 billion figure cited in the investigation: reporting based on the July judgment places the blocked balance at about R13 million.
What the High Court Actually Ruled
The Gauteng Division of the High Court in Johannesburg dismissed Kastelo’s application on July 28, 2026, upholding the blocking order. The court did not need to establish that Kastelo had definitively violated exchange control law at that stage. Instead, it considered whether SARB had reasonable grounds to suspect a contravention when it issued the blocking order. The court found that threshold had been met.
That distinction matters because the ruling does not amount to a final criminal or regulatory finding that Kastelo unlawfully moved R4 billion offshore. The judgment dealt with the legal basis for SARB’s blocking action and the evidence supporting its suspicion. The broader investigation into Kastelo’s business model and possible exchange-control violations remains separate from that threshold finding.
The case highlights a growing regulatory challenge for South African fintech and cryptocurrency businesses that operate across borders. Traditional exchange control rules were designed around conventional foreign currency transactions, while crypto arbitrage can move value between jurisdictions through digital assets, exchanges and automated trading infrastructure. Kastelo’s case therefore puts renewed attention on how South Africa applies its exchange-control framework to cryptocurrency businesses and client-funded offshore trading strategies.
The outcome could also influence how crypto arbitrage platforms structure foreign currency transactions, client mandates and lending arrangements in South Africa. For now, however, the key facts remain that SARB is investigating transactions involving approximately R4 billion, the High Court found reasonable grounds for SARB’s suspicion, and Kastelo continues to dispute the central bank’s interpretation of its business model.
