According to the banking regulator, minimizing risk by disconnecting crypto-related consumers may represent a “threat” to financial integrity. The Reserve Bank of South Africa’s Prudential Authority advised its subsidiaries to avoid illegal activity, asking banks not to terminate all links with bitcoin.
It implied that such an act might pose a higher risk in the long term. Prudential Authority CEO Fundi Tshazibana signed the formal notification. Certain South African banks have already severed links with crypto asset service providers (CASPs), as referred to in the letter, due to unclear laws or a high-risk component. However, the notification emphasizes that risk evaluation does not imply abandoning cryptocurrency entirely:
“Risk assessment does not always mean that institutions should aim to eliminate risk totally (also known as de-risking), for example, by terminating client relationships that may entail CASPs.”
The Reserve Bank issued a local banking system risk assessment in late July. According to the research, cryptocurrencies and virtual assets were among the top ten dangers identified by the main local banks. Before the study, the South African government intended to classify cryptocurrency as a financial asset for regulatory purposes. It argues that such a move may even constitute a “threat” to general financial integrity since it could limit the options for dealing with concerns like money laundering. The categorization legislation is likely to be enacted within the next 12 months.
South African cryptocurrency exchanges reacted favorably to this statement. Many people feel that this action will increase adoption in the country. The country has witnessed significant interest and innovation in the crypto ecosystem, including “in real life,” or IRL, crypto use cases. South Africa is home to crypto ventures such as Bitcoin Ekasi, a township that introduced Bitcoin to support the financial independence of local underrepresented populations and Unravel Surf Tourism, a South African-based pro-crypto travel firm.
Featured Image: DepositPhotos @EdZbarzhyvetsky.
