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 directed financial institutions to serve customers handling cryptocurrency transactions.
In the guidelines released by the Reserve Bank’s Prudential Authority, the SARB stated that financial institutions should not place an overall ban on cryptocurrencies, but instead called for banks to conduct due diligence when dealing with clients that have digital assets. The guidelines advise banks to employ anti-money laundering and counterterrorism financing for all crypto transactions. The guidelines were issued after some banks closed clients’ accounts that own cryptocurrencies, citing a lack of appropriate regulations to govern the sector. The directive stated:
Banks may act as a conduit for funds linked to crypto asset service providers activity and may play a role in customers wishing to purchase crypto assets or receive pay-outs for the sale of crypto assets via fiat currency into their bank accounts. Banks must ensure that they maintain adequate records in respect of all customer transactions, including fiat-to-fiat, fiat-to-crypto and crypto-to-fiat transactions.
In response to banks shutting down crypto-related accounts due to greater risk exposure, the SARB acknowledged that risks do exist in the market, but banks should rather conduct a comprehensive assessment instead of resorting to such grave measures.
In July, the SARB deputy governor Kuben Naidoo confirmed that the country will roll out cryptocurrency regulations over the next 12 – 18 months, and said that it would not identify them as a payment option, but rather as a financial asset that can be utilised in the mainstream sector. As a financial product, cryptos will fall under the purview of South Africa’s Financial Intelligence Centre Act and will be monitored for money laundering, tax evasion, and terrorist financing activities. He added that the SARB plans to develop a regulatory framework for South African exchanges to allow crypto listings which would include traditional banking regulations such as KYC rules and exchange control regulations.
The SARB is also investigating the possible introduction of a CBDC, after having completed 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.