FNB, one of the five biggest banks in the country, has declared that it’s suspending its services to the crypto exchanges. This decision was announced through the letter quoted by a South African tech news platform MyBroadband.
Cryptos taking the lead in finances
Cryptocurrencies have become the most popular and revolutionary entities in the financial world. Since 2008 and the birth of blockchain, this ‘democratized’ form of currency has slowly, but firmly, entered many industries and even taken leading roles. The most notable example here is a crypto-based investment and high volatility of Bitcoin.
Besides being one of the most lucrative investing assets, and probably more importantly, cryptocurrencies have been created to ensure the utmost security and anonymity of transactions. In today’s financial world, where cyber-attacks and thefts are so rampant, you can never be too careful about your financial security. That’s where cryptos are coming in and making financial accounts more secure.
However, besides cryptocurrencies and their financial applications, blockchain can be used for so many different purposes. For example, there’s Carrefour and Nestle who are incorporating blockchain technology into their milk products for infants. This enables customers to not only track the products that they’ve ordered but also to check what’s inside of them and when/where they’ve been made.
Blockchain can also be used in politics. Since it’s so secure and anonymous, it can be incorporated in the election process. With the blockchain-powered voting system, the votes will be so much more secure and rig-free, while the voters will remain as anonymous as ever.
However, one of the things that are being criticized a lot is the fact that there is no sophisticated regulatory framework that can work for anyone. Sure, there might be sporadic restrictions in some countries like India and the UK, however, when it comes to having a well-rounded crypto policy, the majority of countries are failing.
This condition is certainly true for South Africa. According to Google Trends analytics, the country is second in terms of global Bitcoin search interest, falling behind Nigeria – yet another African country. In general, Africa is some kind of a hub for cryptocurrencies since the softest financial regulations can be found exactly on this continent.
No longer working with crypto exchanges
According to FNB’s letter quoted on MyBroadband, the bank has long been considering its “risk appetite” for virtual currencies and virtual currency exchanges. And because there are no legal frameworks regulating the use of cryptocurrencies in the country, FNB has decided to suspend every crypto exchange account on its platform.
Apart from various tax laws, the South African government has yet to enact more sophisticated crypto-regulation. However, the bank has also mentioned in the letters to its crypto exchange customers that once the country implemented a firm governing policy for cryptocurrencies, it would certainly revise its policy and get back to its crypto customers.
Many South African crypto exchanges confirm that FNB has already notified them of its decision and cooperating with them to ensure the smoothest transition. According to Marius Reitz, general manager of popular African crypto trading service Luno, FNB will be shutting down the exchange’s crypto accounts by the end of the first quarter of 2020.
Other exchanges are also commenting on this development, hoping that the FNB’s case is an exception and not many South African banks will follow its steps. Besides, they’re optimistic that FNB’s suspension of crypto accounts won’t be drastically affecting their services.
VALR, yet another South African crypto exchange platform, announced that this move will not undermine its crypto operations. Besides, they’re cooperating with FNB to make this transition as harmless as possible. As the VALR’s spokes declared, other banks have yet to take a stance regarding crypto exchanges and they’re hoping they won’t make similar decisions.
Crypto regulations around the world
As for global crypto-related policy, South Africa isn’t the only country where banks are withdrawing their services to crypto exchanges. In India, for example, the country’s central bank prohibits its commercial banks from having crypto exchange customers.
Having become such a big hit in the financial world, India banned any type of use of cryptocurrencies in April 2008. Prior to this development, Indian banks were associating with crypto exchanges, along with other entities, and allowing their customers to make transactions in any currency that they desired. In addition, in July 2019, the inter-ministerial committee has totally criminalized the use of cryptocurrencies for any purpose – including mining, buying, selling or storing Crypto Currencies, and their use as a means of raising funds or for investments.
In Australia, where cryptocurrency is widely used, the government and its Securities and Investment Commission are also making an effort to devise a more comprehensive framework. According to the recent 2019 update to the initial coin offerings (ICOs) and crypto guidelines, token issuers and investment advisors dealing in tokens deemed financial products require an Australian Financial Services (AFS) license.
On the cryptocurrency exchange front, for those platforms that list tokens deemed as financial tokens, an Australian market license is mandatory. Such platforms may also require a clearing and settlement (CS) facility license. “These regulatory requirements are in place to maintain the integrity of Australia’s financial market and ensure consumer protection,” the regulator said.
For ASIC, updating ICO and crypto guidelines is an effort directed at battling crypto-related frauds. This anti-fraud policy is implemented in conjunction with other relevant agencies, such as the Australian Competition and Consumer Commission (ACCC). As previously reported by Cointelegraph, the ACCC declared that crypto scams amounted to $4.3 million in the country in 2018.
And to get back to our crypto exchange withdrawal trends, the UK has also followed the same pattern. In August 2019, Barclays also suspended its partnership with the US-based crypto exchange mammoth Coinbase.