Central Bank of South Africa Tells Local Banks to Collaborate With Crypto Exchanges
Local commercial banks have been explicitly instructed by the South African Reserve Bank, also known as the Central Bank of South Africa, to collaborate with cryptocurrency exchanges and crypto asset service providers (CASPs).
On Thursday, the Central Bank of the country issued a guidance letter to commercial banks regarding how they should handle transactions involving crypto asset service providers.
In the note that was signed by Fundi Tshazibana, the Chief Executive Officer of the South African Reserve Bank, it was stated that the Central Bank is aware that some banks in the nation have previously chosen to terminate banking services that were offered to crypto service providers. This information was stated in the note that was signed by Fundi Tshazibana.
According to the note, the banks made the decision to stop doing business with companies that offer services related to cryptocurrencies because of the risks associated with money laundering, financing of terrorism, and financing of proliferation that comes with the fact that crypto service providers do not need to comply with any formal regulatory requirements.
In the memo, the SARB stated that risk assessment by banks should not mean that they should strive to avoid risk totally by cutting off banking services from crypto asset service providers. This is despite the fact that the SARB acknowledged the justifications given by the banks for such terminations (also known as de-risking).
According to the paper, it is dangerous for the world’s financial system if banks completely close the accounts of cryptocurrency companies.
As a result of this, the regulatory agency for the financial industry advised financial institutions to conduct risk assessments on a case-by-case basis rather than completely shunning crypto-related firms.
The letter was concluded by the South African Central Bank with the statement that the choice to de-risk should only be made if the risk posed by a specific client or firm is too big to manage satisfactorily. The SARB highlighted once more that the decision must be made after conducting adequate research and giving it careful thought.
Encouraged by the Proposal to Regulate Crypto Assets
The announcement made by the SARB comes after crypto service providers in South Africa have argued for a significant amount of time that unbanking them is discriminatory and harmful to them.
In March of the previous year, crypto business providers in the country voiced their concerns regarding the absence of clear laws in the digital assets industry, claiming that this makes it difficult for them to run their businesses.
The accounts of major cryptocurrency exchanges, such as Luno and VALR, were closed by First National Bank in March 2020. First National Bank is one of the “big five” banks in South Africa.
When Standard Bank, another major local financial institution, informed automated cryptocurrency arbitrage firms that it was canceling their accounts in October of the previous year, it caused shockwaves to go across South Africa’s bitcoin market.
Following the recent announcement that the regulator intends to oversee the cryptocurrency market, the Central Bank has given the go-ahead for lenders to begin serving customers who use cryptocurrencies.
The South African Reserve Bank revealed its intentions to create a regulatory framework to control cryptocurrency transactions and to define cryptocurrencies as an asset rather than a currency just one month ago.