The South African Reserve Bank (SARB) has issued guidelines for local banks to do business with cryptocurrencies and cryptocurrency companies. The country’s central bank has instructed financial institutions to serve clients handling cryptocurrency transactions.
In guidelines published by the Reserve Bank’s Prudential Authority, the SARB said financial institutions should not place a blanket ban on cryptocurrencies, but instead urged banks to conduct due diligence when dealing with customers who have digital assets. The guidelines advise banks to use anti-money laundering and counter-terrorism financing for all crypto transactions. The guidelines were issued after some banks closed the accounts of customers who own cryptocurrencies, citing the lack of appropriate regulations to govern the sector. The directive stated:
Banks can act as a conduit for funds related to the business of cryptocurrency service providers and can play a role in customers who wish to purchase cryptocurrencies or receive payments for the sale of cryptocurrencies via fiat currency on their bank accounts. Banks must ensure that they maintain adequate records in relation to all client transactions, including fiat-to-fiat, fiat-to-crypto and crypto-to-fiat transactions.
In response to banks closing cryptocurrency-related accounts due to increased risk exposure, the SARB acknowledged that there are risks in the market, but banks should rather conduct a full assessment instead of resorting to such severe measures.
In July, SARB Deputy Governor Kuben Naidoo confirmed that the country will introduce cryptocurrency regulations in the next 12-18 months and said it will not identify them as a payment option, but rather as a financial asset that can be used in the main sector. As a financial product, cryptocurrencies will fall under the South Africa Financial Intelligence Center Act and will be monitored for money laundering, tax evasion and terrorist financing. He added that the SARB plans to develop a regulatory framework for South African exchanges to allow cryptocurrency listings that would include traditional banking regulations such as KYC rules and exchange control regulations.
SARB is also investigating the possible introduction of a CBDC, after completing a technical proof-of-concept in April 2022.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial or other advice.