The world’s biggest cryptocurrency scam of last year was a jolt to South Africa’s regulator — and not everyone will wait to see how it shakes out.

As major financial hubs like Singapore redraw legislation to lure crypto firms and with the U.K. government facing calls to embrace digital currencies, South Africa’s burgeoning exchanges say they are having to move headquarters abroad due to uncertainty over potential government regulation.

Behind the frustration is a lack of oversight and limits on marketing to potential customers. Revix, a Cape Town-based operator specializing in bundles of different coins, is shifting its head office to the U.K. and planning another location in Germany to fuel growth.

Luno, Africa’s largest digital-currency platform, is registered in London and has a presence in Singapore.

South African authorities “have been incredibly slow in terms of regulation in the industry and that leads to businesses looking internationally,” Revix Chief Executive Officer Sean Sanders said in an interview. “In an unregulated environment, a customer arrives at our platform with skepticism, and rightfully so.”

Digital currencies are moving from the periphery of the finance world to the mainstream, with Elon Musk’s Tesla Inc. plowing $1.5 billion into Bitcoin and wealthy hedge-fund managers like Paul Tudor and Stanley Druckenmiller supporting the currency.

The interest from institutional investors has propelled Bitcoin to a record of more than $58,000 last month before the token pared some of its gains, emerging as a hedge for inflation risk just as fears about price pressures escalate.

But in a watershed for the industry in South Africa, a suspected Ponzi scheme may have caused investors to lose as much as $1.2 billion worth of the most famous cryptocurrency.

Scam of the Year

Mirror Trading Investments was placed in provisional liquidation in December and has since been described as the world’s biggest crypto crime of last year by blockchain researcher Chainanalysis. The firm allegedly collected over 23,000 Bitcoin from investors, and its CEO is thought to have fled to Brazil.

“South Africa has a sad history of pyramid and Ponzi schemes and crypto was the obvious new format for this,” said Earle Loxton, CEO of Digital Currency Index, a platform he co-founded with former FirstRand Ltd. head Michael Jordaan. “Honest operators welcome regulation as it makes it possible for their clients to invest with confidence, especially at institutional level.”

South Africa may be frustrating its entrepreneurs, but it is seen as ahead of the rest of the continent, given regulators and industry are working together to table proposals. In Nigeria, plans to regulate the sector have been suspended until operators open bank accounts in the West African nation.

The priority for South African regulators is to seek better protection for consumers rather than businesses, according to Brandon Topham, head of enforcement at the Finance Sector Conduct Authority of South Africa. Further proposals are expected in the next two months, he said.

Regulatory Momentum

The top banks in South Africa have all backed regulatory efforts to develop a framework for crypto assets but are currently split in their approach to industry players.

While Standard Bank Group Ltd. has not barred crypto-asset firms from any of its services, FirstRand’s First National Bank has no banking relationships with virtual-currency exchanges or traders, the lenders said in response to emailed questions.

As unregulated entities, South Africa’s crypto firms find it difficult to market on Facebook Inc. and Twitter Inc., setting back their prospects for growth, according to Sanders. South Africa’s revenue collection service is another loser from the lack of policy, he said, as moving head offices means paying tax in different countries.

The lack of regulatory framework has also made it difficult for crypto platforms to operate bank accounts, said Luno head Marius Reitz. “In turn, this makes it very difficult for customers to buy Bitcoin with their local fiat currency.”

There are signs of movement. Draft rules to have crypto assets declared financial products have been published by the regulator. But that runs the risk of ignoring the novelty value of crypto, Sanders said.

“South Africa seems to go in the opposite direction of some of the more developed market pioneers and innovators in this space,” he said. “For regulators to apply hundred-year-old securities regulations to the novel cryptocurrency asset class seems lazy.”