Why Are Krugerrands Illegal?

Posted - August 11, 2023
Why are krugerrands illegal

Krugerrands have been one of the global community’s favorite bullion coins for generations. Distributed from the South African Mint, the coins exploded onto the global scene in 1967. By the year 1980, the coins offered unprecedented popularity; they accounted for over 90% of total gold coin sales globally. The designs of these coins are intimately related to their history. On the obverse, you’ll see Paul Kruger, a controversial figure in 20th century South African politics. The reverse of the .9167 gold coin features the South African national animal, the Pronking Springbok. 

But the popularity of the Gold Krugerrand isn’t the only reason why it continues to occupy a pivotal place in modern gold collections. Krugerrands were part of a controversial, tumultuous history involving import bans from some of the world’s most powerful governments. Why are Krugerrands illegal? While Krugerrands aren’t illegal to own or import now, they certainly used to be. 

This guide will explain to readers everything they need to know about today’s big question: why are Krugerrands illegal? 

Legal Restrictions on Krugerrands

Legal restrictions on the Gold Krugerrand Coin began in the 1980s and 1990s, when many Western countries banned the coins in protest of the Apartheid government that Paul Kruger helped to support. In this section, we’ll explain three main reasons that can help answer our question: why are Krugerrands illegal during certain periods of American history. 

Anti-Money Laundering Regulations

Some governments place restrictions on gold products in order to combat money laundering. Gold is often used as a tool for money launderers. Some criminals might buy gold Krugerrands with illegally obtained money, melting them down, and then recasting them into an unrecognizable gold bar. After selling the new gold bar, they have legitimate cash from a legal source. 

Why are Krugerrands illegal? For a few governments, restrictions on the import of all gold coins might serve as a way to mitigate the ease of gold-related money laundering. 

Counterfeit Concerns

Falling victim to counterfeiting operations is a fear that all gold coin collectors have – and with good reason. The global fake products market accounted for around $600 billion in 2022, and this number is growing all the time. Gold’s intrinsic value makes it a popular target for counterfeiters, and sophisticated operations can generate millions of dollars in revenue from unsuspecting victims every year. 

Why are Krugerrands illegal? Some governments might place restrictions on the trade of gold coins in order to combat counterfeiting. Because Gold Krugerrands use no significant security and anti-counterfeiting features, the coins are popular targets for scammers looking to make a quick buck. 

Trade and Sanctions

Why are Krugerrands illegal during Apartheid? The answer has to do with the coin’s obverse depiction. Paul Kruger appears on this side of the gold piece. Kruger held power during the Apartheid period, an era of racism and segregation in South Africa’s history. Not all people view Kruger as a problematic emblem; some South Africans see him as a tragic hero who did what he could during a difficult time.

Why Are Krugerrands Illegal?
1/10 oz Gold Krugerrand Coin Obverse

President Ronald Reagan banned the import of Krugerrands during the 1980s in order to protest South Africa’s apartheid system. During periods where two countries are at war or on the precipice of conflict, similar sanctions may be applied to gold coins. 

Krugerrands and Gold Smuggling 

Like all gold coins, Krugerrands are used to smuggle gold and facilitate criminal activities. Why are Krugerrands illegal? These pieces aren’t currently illegal to possess, but certain governments have placed restrictions on gold imports in order to combat rampant criminality using bullion.

Attracting Criminal Activities

Krugerrands are made using .9167 gold bullion. Like we mentioned toward the beginning of this guide, they can be used to assist in complex money laundering operations. But Krugerrands might also be used as payment for illegal goods and services. Compared to fiat currency – especially currency held in banks – gold coins like the Krugerrand are harder to trace by governments looking to prove wrongdoing. 

Counterfeiting is another illegal practice that frequently involves Krugerrands. Unlike coins like the Royal British Mint’s Gold Britannia, the Krugerrand is fitted with minimal tools to fight against the threat of fake coinage. 

Illicit Cross-Border Transactions

Sometimes, Krugerrands may be used to conduct illegal trade across hostile countries. Some smugglers use gold coins instead of cash in an attempt to get around customs and subvert embargoes and trade agreements. This is relatively rare, but that doesn’t mean that it doesn’t happen. Why are Krugerrands illegal sometimes but not always? During certain periods, hyper-specific cross-border transaction restrictions may make it illegal to travel with gold coins like Krugerrands. 

Impact on National Economies

When Krugerrands are illegal in a country, this can significantly influence the gold trade within the larger economy. In fact, Krugerrands from the period of U.S. embargo might still sell for a premium, as coins from that year were distributed in lower mintages by the South African Mint. Why are Krugerrands illegal? Krugerrands have been banned for several reasons, including political protest against apartheid and the risk of counterfeiting. 

2023 1/10 oz South African Gold Krugerrand
1/10 oz Gold Krugerrand Reverse

But investors shouldn’t underestimate the impact that Krugerrand bans can have on the general bullion sector. High premiums and long-term price appreciation are two factors that make the Gold Krugerrand a premier investment vehicle for numismatic bullion coin collectors. 

Environmental and Ethical Concerns

Let’s take a closer look at the environmental and ethical concerns associated with Krugerrands. It’s important that collectors understand that Krugerrands aren’t particularly unique among other gold coins, especially when it comes to environmental and human rights harms. Still, when we’re asked a question like, “why are Krugerrands illegal,” it’s essential to consider how gold mining generally impacts the environment. 

Ecological Impact of Gold Mining

Especially in South Africa, the gold mining industry is disastrous for the environment. Ecological impacts of gold mining cannot be overstated, and the process is dangerous for a number of reasons. Mining gold can ravage the landscape of a country, contaminate valuable water supplies, and destroy key ecosystems. 

We don’t know the long-term effects of modern gold mining techniques on the environment and people who live in it. It is clear, however, that the use of toxic chemicals like cyanide and mercury during the gold mining process can be devastating for the natural environments where mining occurs. Why are Krugerrands illegal? There are several reasons why Krugerrands might be banned in certain countries, and environmental risks of mining can lead to restrictions on all gold sales. 

Human Rights Issues in Gold Production 

South Africa’s mining industry has a reputation for human rights abuses. Complaints from thousands of gold miners in South Africa demonstrate that the sector has quite a bit of work to do before it can be considered a rights-friendly operation. South Africa certainly isn’t alone in this problem; gold mines all over the world have been accused of allowing rampant human and worker rights violations. 

Why are Krugerrands illegal? Right now, there are no restrictions on the sale, collection, or international trade of Gold Krugerrands from the South African Mint. If this changes in the future, concerns about human rights violations in South Africa’s gold mines might be to blame for the change in policy. We don’t anticipate that this will happen. Investors who are bullish on the future of South Africa’s most important bullion product still consider the Krugerrand a key investment option for diversifying and expanding their precious metal portfolios. 

Pressure for Ethical Sourcing 

Increasing pressures for more ethical sourcing for gold products characterize the modern bullion industry. Some collectors don’t like the idea that their gold coins might have been sourced unethically. For the Gold Krugerrand, these concerns are sometimes legitimate. After all, South Africa does not offer a stellar reputation for promoting human rights and environmental health in their landmark mines. 

Why Are Krugerrands Illegal?
South African Gold Krugerrands

If ethical sourcing is a primary concern, we might recommend going with a different coin. Why are Krugerrands illegal? No governments (to our knowledge) have banned Gold Krugerrands because of ethical sourcing concerns. Will this change in the future? It’s definitely hard to say. Increasing pressure from environmentalists and human rights activists could potentially result in restrictions on coins from South Africa, but there isn’t any evidence to suggest that this will happen anytime soon. 

Government Policy and Fiscal Control

Government policy and fiscal control can also play important roles in answering a question like, “why are Krugerrands illegal?” At the moment, the United States does not ban the import of possession of Gold Krugerrands. But the U.S. – and other governments – have banned the possession of certain gold coins in the past. Bans on private coin collection are generally part of a larger government strategy to limit the circulation of gold bullion. Why are Krugerrands illegal? Right now, they aren’t. 

Is it likely that the United States will ban Gold Krugerrands to control gold supply in the next decade? We don’t think so. But it isn’t entirely impossible. If federal regulatory authorities want to limit private collections of gold bullion, making the Krugerrand illegal may be a decent first step. 

Controlling Gold Circulation 

Banning gold is a good way to limit or control circulation. During certain periods of economic strife, governments might take actions to limit the supply of gold bullion by banning the import of certain coins. While Reagan’s ban on the Krugerrand in the 1980s was motivated primarily by the government’s opposition to South Africa’s apartheid government, other bans might not be based on political or ethical objections. 

Why are Krugerrands illegal? Krugerrands might be banned by a country for several reasons, even though they’re currently legal to buy, store, and trade. One reason a Krugerrand may be illegal has to do with the national supply of gold. If the U.S. government decides that Krugerrands are a major source of gold hoarding and wants to take action, banning the Gold Krugerrand might be an attractive legislative move. 

Impact on Currency Stability

When gold gains traction as an investment vehicle, it sometimes negatively impacts the stability of traditional fiat currencies. As a non-correlated asset, gold bullion thrives in economically uncertain environments. When the U.S. government wanted to bolster the strength of the United States Dollar during the Great Depression, one of their first moves was to mitigate the prevalence of gold hoards. 

Why are Krugerrands illegal? These coins are sometimes banned as part of a larger strategy to limit gold hoarding and stacking. When governments want to strengthen their own currencies during times of intense gold and silver speculation, banning coins like the Krugerrand is a tried and true economic policy. 

But why are Krugerrands illegal during some periods and not others? Several elements influence a government’s decision to ban a coin like the Krugerrand, and the strength of fiat currency is one major factor. 

Role in Economic Crises

Gold coins like the Krugerrand are also essential elements of economic crisis planning for many consumers. Some collectors view gold bullion as the best way to improve their portfolio with diversified precious metals. Adding Krugerrand Gold Coins to your portfolio can help you to avoid the pitfalls of rapid inflation and other economic crises. 

Why are Krugerrands illegal during economic crises? At the moment, there are no governments moving to ban Krugerrands in order to improve economic conditions. This doesn’t mean it might not happen in the future. Because Krugerrands are a high purity gold product used to stack the precious metal, they’re an exceptional option for investors who are concerned about worsening global economic conditions. 

Is it possible that Krugerrands might be banned during an economically volatile period? It most certainly is a possibility. After all, banning certain gold bullion items can bring investors back into more traditional investment vehicles, which can benefit the economy. 

Final Thoughts: Why Are Krugerrands Illegal? 

Why are Krugerrands illegal? The bottom line is that these popular South African gold coins are not currently banned by any governments we know of. However, the history of the Gold Krugerrand is packed with examples of embargoes by powerful governments, including the United States of America. It’s impossible to say if this controversial coin will be banned again in the future. 

But for now, you can still stack your South African Krugerrands with confidence – because they’re not illegal. 

About The Author

Michael Roets is a writer and journalist for Hero Bullion. His work explores precious metals news, guides, and commentary.