South African financial institutions will now be allowed to deal with funds linked to digital assets and shouldn’t indiscriminately block all crypto clients, the country’s central bank said.
Banks in the country “may act as a conduit for funds” tied to crypto asset service providers and “may play a role in customers wishing to purchase” or “receive payouts in fiat currency” in their bank accounts for the sale of crypto, the South African Reserve Bank (SARB) said in new guidelines published this week.
The guidance was released after some local banks previously moved to shut down accounts tied to crypto exchanges, citing exposures to risk. In the published document, the SARB said it was aware that certain banks in the country have blocked clients with links to crypto. It added that although thorough risk assessment is necessary, the “wholesale termination of client relationships” threatens financial integrity.
Risk assessment does not necessarily imply that institutions should seek to avoid risk entirely (also referred to as de-risking), for example, through wholesale termination of client relationships which may include Crypto Assets Service Providers
South African Reserve Bank
In June 2021, some banks in South Africa also blocked customers from using their credit and debit cards to purchase crypto on foreign exchanges, while the central bank warned existing regulations didn’t allow “for cross-border or foreign exchange transfers for the explicit purpose of purchasing crypto assets.”
The SARB also notes that “a “one-size-fits-all” approach in dealing with crypto asset services providers /Crypto Assets from a money laundering, terrorist financing and proliferation financing (ML/TF/PF) risk perspective may signify inadequate risk understanding and risk management, as business models may widely differ, and this goes against the spirit and practice of a risk-based approach.”
South Africans, however, are allowed to use their annual “single discretionary allowance” of up to 1 million South African rands (about $59,000) or foreign capital allowance of up to 10 million rands ($580,000) to buy crypto.
Read also; South Africa Announces Biggest Interest Hike in nearly 20 years.
