Sarb tells banks they should work with crypto exchanges

by Arthur · August 18, 2022

In a significant development for South Africa’s cryptocurrency industry, the Reserve Bank’s Prudential Authority (PA) has issued a “guidance note” to local banks saying they should offer banking facilities to crypto exchanges.

In recent years, several major banks have moved to “reject” such exchanges, including Luno and VALR.com. In 2019, FNB controversially ended banking services to “virtual currency exchanges and intermediaries that trade in virtual currency”.

VALR chief Farzam Ehsani on Thursday hailed the guidance, titled “Supervisory Guidelines for Matters Related to the Prevention of Illegal Activities”, calling it a “major step forward for crypto, for South Africa and for the banks themselves”.

“It’s especially useful for companies in the crypto space that responsibly strive to protect products that serve people,” Ehsani said.

The note to banks and other financial institutions was written by PA chief Fundi Tshazibana. In essence, Ehsani said, the authority has said it is “time to bank crypto companies”.

“PA is aware that certain banks in South Africa have previously chosen to close [banking services provided to] Crypto asset service providers (CASPs) …,” Tshabizana said in the note. Ehsani said that to his knowledge, this is the first time the Reserve Bank, where the PA is housed, has officially acknowledged that this happened.

“FNB released us and other major crypto companies headquartered in South Africa back in 2019/2020 and we all moved to other banking partners in the country,” he said.

According to Tshazibana’s note, risk assessment by banks “does not necessarily imply that institutions should seek to avoid risk altogether (also known as de-risking), for example through wholesale termination of customer relationships which may include CASPs”.

“Trade with discretion”

“The PA still leaves room for banks to act with discretion in this regard, stating that “if the risk posed by a particular business or customer is too great to manage successfully, the decision to remove the risk should only be taken after careful consideration because . diligence and consideration,” Ehsani said.

“The remainder of the memo provides guidance relating to the treatment of CASPs and crypto-assets ‘based on the application of a thorough risk-based approach’. The PA effectively guides banks to ‘demonstrate an understanding of what elements drive or mitigate.’ [money laundering and other] risk within CASPs and crypto assets versus having a blanket ban on banking crypto companies,” he added.

Read: FNB explains why it closes bank accounts for crypto exchanges

“Risk and bad actors obviously remain in the crypto industry (as they do elsewhere) and banks will not immediately start bankrolling all crypto companies. But this note takes South Africa in the right direction in terms of allowing new technology and innovation to flourish in the country, Ehsani said.

– Starting up is difficult. Crypto startups are even more difficult, especially when a basic thing like having a bank account is not a given. Well done to the Reserve Bank: This is an important and much needed statement for the country.”