The First National Bank (FNB), South Africa’s second-largest retail bank, has notified leading cryptocurrency exchanges in the country including Luno, ICE3X, and VALR, that it will shut down their bank accounts, a blow to one of Africa’s active cryptocurrency trading enclave. FNB cites fuzzy regulation around virtual currencies.
South Africa Leads in Cryptocurrency Adoption in Africa
It must be noted that South Africa leads in cryptocurrency adoption thanks to established trading platforms and a high number of South Africans with bank accounts. In a letter, the bank said it was re-evaluating their risk appetite but would re-open their bank accounts if there is clarity.
“FirstRand Bank has been considering its risk appetite in respect of virtual currencies and virtual currency exchanges for some time. Within this context the bank has taken the decision to discontinue the provision of banking services to virtual currency exchanges and/or entities dealing/trading in virtual currency. Future regulatory clarity may cause us to revise our decision.”
Exchanges Operation Will not be Impacted
Luno Africa General Manager Marius Reitz has confirmed the reception of the letter stating that FNB will indeed discontinue their banking service from March 2020. However, he assured clients that their operation will not be affected because of their relationship with other banks. Reitz said they are committed and will continue to work closely with SA Reserve Bank and other relevant regulators.
“In the absence of formal regulations, banks will continue to assess their exposure to cryptocurrencies. Luno is committed to working with the SA Reserve Bank and collaborating with other regulators to ensure they are prepared to embrace this change to our financial infrastructure.”
AfCTA Presents an Opportunity
Being a new disruptive phenomenon, rules around cryptocurrencies continue to be drafted globally. As compliant entities, banks will always reassess their exposure more so if they have a partnership with exchanges. Exchanges seem to be readying for the massive opportunity that would further boost cryptocurrency and blockchain after 52 African states signed the African Free Continental Trade Agreement (AfCTA). The deal is aimed at strengthening African economies by fostering the free movement of people and goods.
Last month, Paxful, a peer-to-peer trading platform announced a 2,400% year-to-year rise in the number of new users in South Africa, in an illustration that despite the challenges, South Africa is poised to be one of the largest cryptocurrency trading markets in Africa. Overly, the number of processed transactions from Africa, according to the report, rose 64% while transaction volumes rose 130%.