South African Reserve Bank encourages friendly behavior with crypto

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The Prudential Authority of the Reserve Bank of South Africa sent guidelines to prevent illegal activities to its affiliates, which included encouraging not to cut off all ties with cryptocurrency.

It suggested that such action could pose a greater risk in the long run.

The official notice was signed by the CEO of the Prudential Authority, Fundi Tshazibana. In the past, certain South African banks have cut ties with what is called in the document, “Crypto Asset Service Providers” (CASP), due to unclear regulations or a high risk factor.

However, the notice emphasizes that risk assessment does not mean dropping crypto entirely:

“Risk assessment does not necessarily imply that institutions should seek to avoid risk entirely (also called de-risking), for example, through wholesale termination of customer relationships, which may include CASPs.”

It goes on to say that such a move could even be a “threat” to overall financial integrity, as it may limit the possibilities of dealing with issues such as money laundering.

At the end of July the Reserve Bank published an assessment of risks within the local banking sector. According to the report, included in the top 10 threats identified by major local banks were cryptocurrencies and virtual assets.

Related: European Central Bank pursues digital asset licensing guidance

Prior to the report, the South African government released a plan that included the classification of crypto as a financial asset for regulatory purposes. The laws related to the classification are expected during the next 12 months.

Crypto exchanges in South Africa reacted positively to this announcement. Many believe that this move will drive adoption in the country. Already the country has significant signs of interest and innovation in the crypto community including IRL crypto use cases.

South Africa is home to crypto projects such as Bitcoin Ekasi, a small town that introduced Bitcoin as a means to strengthen financial independence to local underserved communities, and Unravel Surf Travel, a travel company for crypto travel in South Africa.