The South African Reserve Bank (SARB) recently issued a notice to all South African banks regarding their treatment of cryptocurrency, allowing them to serve crypto clients. This guidance note was released following local banks’ decisions to block, flag or close client accounts where those accounts were linked to crypto transactions – citing risk exposure. The SARB has clarified that this attitude is not necessary where those banks apply sufficient money laundering, terrorist financing and proliferation financing (ML/TF/PF) controls to their crypto clients.
Since the crypto boom in 2020, crypto’s use has grown in South Africa, without a legal framework to support it. This has lead to uncertainty of how to treat the use of cryptocurrency and those businesses which provide crypto services, also called crypto asset service providers (or ‘CASPs’). In mid 2021, banks across South Africa began to block transactions with major crypto exchanges, citing concerns of the lawfulness of those transactions line with the Exchange Control Act and SARB regulations. Since then, many major banks have refused to service crypto clients, citing similar legal concerns and with additional compliance risks.
The notice, found here, describes the ongoing obligations of banks to manage risk through their ML/TF/PF controls and that doing so does not entail avoiding risk entirely. As such, SARB has recommended that banks and other financial institutions incorporate crypto-asset service providers into their existing ML/TF/PF policies and apply a risk-based approach when conducting business with crypto clients.
Banks are still afforded the discretion to refuse servicing crypto clients if, in their opinion and based on their risk-based approach, those clients pose too much of a ML/TF/PF risk.
This guidance is a victory for crypto asset service providers and will assist in the growth of the industry in South Africa.
For more insight on how crypto assets are treated under South African law, see here.
Contact us today if you require advice relating to the use of crypto assets in South Africa.
About the author
Megan started her articles with Dunsters in 2020 and is a graduate of the University of Cape Town (B.COM PPE, LLB). Megan is in the commercial team at Dunsters and enjoys working on drafting all kinds of contracts as may suit our clients’ needs. Her areas of interest lie broadly in the commercial sphere, with a more specialised focus on technology and the law. Megan also writes and oversees the editing of our insights and articles.
In her spare time Megan is Chairperson of the Cape Town Candidate Attorneys’ Association, loves to paint and prefers to spend her weekends outdoors. Cold-water swimming, running and hiking, she is keen on all the outdoor activities Cape Town has to offer.