According to the newest steerage observe issued by the South African banking sector regulator, Prudential Authority, threat evaluation doesn’t imply monetary establishments ought to keep away from or get rid of dangers through the wholesale termination of shopper relationships with entities resembling crypto asset service suppliers. Instead, the regulator desires monetary establishments to solely contemplate “de-risking” when the “risk posed is too great to manage successfully.”
A Threat to Financial Integrity
South Africa’s most important banking business regulator, the Prudential Authority, has mentioned some banks’ selections to terminate relationships with crypto entities “may pose a threat to financial integrity in general.” In addition, the regulator steered that avoiding cryptocurrency entities utterly might probably weaken banks’ threat administration processes.
According to a steerage observe despatched to monetary establishments by Fundi Tshazibana, the CEO of Prudential Authority, the removing of crypto entities resembling exchanges from the banking system “can potentially create opacity in the affected persons or entities’ financial conduct.” The identical additionally eliminates the opportunity of treating dangers resembling cash laundering, terrorist financing, and proliferation financing, the eight-page steerage observe added.
The remarks by Tshazibana come greater than six months after studies emerged that sure South African monetary establishments had despatched out account termination notices to purchasers that supplied automated cryptocurrency arbitrage providers. As beforehand reported by Bitcoin.com News in late 2021, one of many banks, Standard Bank, insisted on the time that the termination of providers to crypto entities was meant to make sure the monetary establishment’s compliance with rules.
However, in the steerage observe, which should even be despatched to the respective establishments’ unbiased auditors, the CEO as an alternative urges banks to carry out the related threat evaluation for every crypto asset (CA) or crypto asset service supplier (CASP). Tshazibana explains:
It is thus prudent for banks to have the ability to threat categorise CA/CASP-related purchasers by way of conducting a threat evaluation which can help banks in figuring out the suitable degree of [money laundering, terrorist financing, proliferation financing] threat administration measures obligatory, versus complete avoidance, in line with the applying of a risk-based strategy.
The CEO argued that the choice to de-risk or terminate service ought to solely be made after the “risk posed by a particular business or customer is too great to manage successfully.”
‘A Great Step Forward for Crypto’
Reacting to the Prudential Authority’s newest steerage observe, Farzam Ehsani, CEO of a South African crypto trade platform known as Valr, mentioned in a tweet that the arguments put ahead by the regulator point out it now understands the advantages of monitoring crypto transactions. Ehsani additionally gave his ideas on what the steerage observe means for the crypto business. He mentioned:
“In my view, this is a great step forward for crypto, for South Africa and for the banks themselves. It’s particularly helpful for companies in the crypto space that are responsibly trying to build products to serve people. Risks and bad actors obviously remain in crypto (as they do elsewhere) and banks won’t immediately start banking all crypto companies.”
The Valr boss additionally argued that the newest steerage observe will seemingly steer South Africa “in the right direction of allowing new technologies and innovation to flourish in the country.”
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