Minimizing risk by disconnecting consumers related to cryptocurrencies may pose a “threat” to financial integrity, according to the banking regulator. Prudential Authority Reserve Bank of South Africa advised their subsidiaries to avoid illegal activity and are asking banks not to end all connections with Bitcoin.
It follows that such an act may pose a higher risk in the long run. Prudential Authority CEO Fundi Tshazibana signed the formal announcement. Some South African banks have already cut ties with cryptocurrency asset providers (CASPs), the letter said, due to unclear laws or a high-risk component. However, the announcement emphasizes that the risk assessment does not mean abandoning cryptocurrency entirely:
“Risk assessment does not always mean that institutions should seek to completely remove the risk (also known as de-risking), for example by terminating relationships with clients that may involve CASP.”
The Reserve Bank issued a local banking system risk assessment at the end of July. Cryptocurrencies and virtual assets were among the top ten dangers identified by major local banks, according to the research. Prior to the study, the South African government had intended to classify cryptocurrency as a financial asset for regulatory purposes. They argue that such a move may even pose a “threat” to general financial integrity, as it could limit the ability to tackle problems such as money laundering. Categorization legislation is likely to be enacted within the next 12 months.
South African Cryptocurrency Exchanges responded favorably to this statement. Many people feel that this event will increase adoption in the country. The country has seen significant interest and innovation in the cryptocurrency ecosystem, including “real life” or IRL use cases of cryptocurrency. South Africa is home to crypto businesses such as Bitcoin Ekasi, a township that has implemented bitcoin to promote financial independence for local underrepresented populations, and Unravel Surf Tourism, a South African pro-crypto travel company.
Featured image: DepositPhotos @EdZbarzhyvetsky.