Crypto platforms come under fire

The cryptocurrency exchange platform Luno says FNB’s announcement earlier this week to stop providing cryptocurrency trading platforms with its banking services will not affect its clients.

“It is business as usual,” Marius Reitz, head of Luno, told City Press’ sister publication, Rapport.

“We have arrangements with other banks in place, so deposits and withdrawals can still be done on the Luno platform.”

Luno is just one of the virtual currency exchanges that will be affected by FNB’s decision to shut down such accounts.

The bank services of other virtual exchanges, including VALR and ICE3X, and their intermediaries will expire at the end of March 2020.

Reitz said Luno clients with FNB accounts would not be affected until then, adding: “From the second quarter of 2020, FNB clients will still be able to deposit money in our other bank accounts.”

According to Reitz, Luno has established relationships with other banks in South Africa.

FNB has also assured individual clients that its decision will have no effect on them and is only applicable to trading platforms and intermediaries that trade in digital money.

“Our decision was made after we looked at the potential risks associated with these platforms, especially because they are not regulated at present,” said an FNB representative.

The bank did not elaborate on its reference to potential risks, but there is global concern that digital money – which can serve as a substitute for global currencies – can be used to finance terrorism, drug trafficking and assassinations, or for other nefarious purposes such as tax evasion and money laundering.

It is unclear whether other banks will follow FirstRand’s example.

Anna Isaac, head of compliance at Nedbank, said the bank was currently considering its position regarding digital trading platforms.

LEGAL REQUIREMENTS

Standard Bank spokesperson Ross Linstrom said the bank regularly engaged with its customers to understand their business models and policies on preventing terrorism and money laundering, as well as whether they were complying with legal requirements.

“We will continuously monitor these clients and developments in the industry,” he said.

At this point, Absa provides no services to digital exchanges.

“However,” said bank spokesperson Carli Cooke, “Absa’s clients who trade in digital money via their debit and credit cards are free to continue doing so.”

FNB’s decision is part of a wider international tendency to impose stricter regulations on cryptocurrencies such as Bitcoin.

The possession of, and trade in, digital currencies has already been banned in countries such as Ecuador, Bolivia, Egypt and Morocco, while Singapore and South Korea have begun to regulate it more strictly.

In Britain, Barclays ended its partnership with the US-based virtual currency exchange Coinbase in August.

And, earlier this year, India’s central bank banned financial institutions from providing banking services to cryptocurrency trading platforms.

In January, the SA Reserve Bank submitted a concept proposal detailing the future regulation of digital currencies. It would involve trading platforms registering with the Financial Intelligence Centre and reporting transactions in excess of R25 000, Netwerk24 reported.

The central bank could not be reached for comment on whether any progress had been made relating to the proposal.

Speaking on Radio 702’s programme, The Money Show, this week, Farzam Ehsani, co-founder and CEO of VALR, called FNB’s decision “a big disappointment”, especially since regulations had become more accommodating.

Ehsani, who was previously head of blockchain at FNB, said he struggled to understand why the bank would want to end services to the “most innovative industry in the last couple of decades”.

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