FirstRand, one of South Africa’s biggest banks, plans to end its relationship with the country’s cryptocurrency exchanges, leaving them outside of the banking system by the end of Q1 2020.
The news was first reported by the South African industry website MyBroadband, which quoted the bank as warning crypto firms to freeze their assets if they couldn’t find an alternative to host their funds.
An excerpt from the letter states:
“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.”
Although the lender has strained relationships with the new asset class, FNB said if the government was able to deliver robust crypto regulation, it might revise the decision to cease its banking services to these platforms.
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Until then, however, any business remotely involving cryptocurrency is strictly prohibited based on the bank’s policies. This means businesses involving mining, media, and even marketing cannot open an account at the major SA bank.
“FNB considers this to be a prudent course of action following a comprehensive review of the potential risks currently associated with these entities, particularly given that appropriate regulatory frameworks are not yet in place,” it further explains.
This issue is not exclusive to South Africa
Local crypto exchanges, including Luno, ICE3X, and VALR, confirmed that FNB would shut down their accounts by next March, but assured their clients that they would ensure a seamless transition to other banking partners.
This issue is not exclusive to South Africa as global banks have been reluctant to do business with crypto firms because of concerns that regulators will soon crack down on them.
The crypto markets woke up in August to the news that Coinbase’s banking relationship was under threat in its largest market in Europe after the cryptocurrency exchange parted ways with Barclays. Shortly after, an online report started circulating and suggested that the San Francisco-based exchange found a replacement UK banking partner in ClearBank.