South African Reserve Bank (SARB) has directed financial institutions in the country to serve customers handling cryptocurrency transactions.
In a guideline, the bank stated that institutions should not impose an overall cryptocurrency ban but called for banks to conduct due diligence when dealing with such clients.
This comes after some banks in the country resolved to close clients’ accounts associated with cryptocurrencies citing a lack of adequate regulations to govern the sector.
“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,” SARB said.
Managing crypto risks internally
Furthermore, banks had shut down crypto-linked accounts due to greater risk exposure. However, SARB acknowledged that risks exist in the crypto market, but the financial institutions must conduct a comprehensive assessment.
According to the regulator, conducting risk assessment ‘does not necessarily imply that institutions should seek to avoid risk entirely.’ SARB emphasized on banks conducting due diligence around money laundering and internal controls.
Notably, several banks in the country had barred customers from using their credit and debit cards to purchase crypto on foreign exchanges.
It is worth mentioning that South Africa accounts for a significant share of crypto investors, attracting diverse players seeking to dominate the market.
Regulator’s friendly stand towards crypto
At the same time, regulators have upheld a friendly approach to cryptocurrencies exploring the sector’s use cases. As reported by Finbold, SARB deputy governor Kuben Naidoo confirmed that the country is set to roll out cryptocurrency regulations that will partly support the sector and incorporate it into the financial space.
Furthermore, the SARB and the Intergovernmental Fintech Working Group completed a joint proof-of-concept project exploring the policy and regulatory implications of introducing the distributed ledger technology (DLT).