FNB to shut down cryptocurrency platforms’ bank accounts

Bitcoin Source: Google Images

First National Bank provided more insight on Wednesday into why it has given notice to cryptocurrency trading platforms in South Africa that it will shut their bank accounts.

Affected currency exchanges include VALR.com and Luno, though FNB hasn’t named any of the companies involved, saying it “cannot provide any information on specific bank accounts”.

In response to questions from TechCentral, an FNB spokesman said via e-mail: “FNB can confirm that it has given reasonable notice to terminate its banking services to virtual currency exchanges and intermediaries trading in virtual currency.”

It said the decision to terminate banking services to these entities does not apply to individual customers.

“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.”

The bank did not respond to certain specific questions from TechCentral, including whether the decision was forced on it by the South African Reserve Bank or some other regulatory body — it’s understood that this is not the case — or whether the move was a response to the possible competitive threat that cryptocurrencies pose to the banking sector in the long term.

In an e-mailed statement, VALR.com CEO Farzam Ehsani confirmed that FNB communicated its decision with his company to discontinue banking services to the entire cryptocurrency industry, including all exchanges and other entities dealing or trading in such currencies.

‘In discussions’

“Our FNB banking facilities currently remain operational, and we are in discussions with FNB about the exact date of termination,” Ehsani said in the statement.

“We will communicate this date to our customers in advance to ensure a seamless transition to our other banking partners, some of whom are already enabled on the VALR platform.”

According to VALR FNB’s decision appears to be an isolated case. “We welcome the positive reception we have received from other South African financial institutions that have banked us and have recognised our significant investment and commitment to complying with local and international guidelines, regulations and laws,” Ehsani said.

“We are hopeful that future regulatory clarity will cause FNB to revise its decision, particularly in light of the increasingly favourable regulatory environment for the cryptocurrency industry that is emerging both in South Africa and abroad.”

In January, the South African Intergovernmental FinTech Working Group — made up of the Reserve Bank, the Financial Intelligence Centre, the Financial Sector Conduct Authority, the South African Revenue Service and National Treasury — issued a consultation paper on policy proposals for crypto assets.

This paper wants a regulated way forward for crypto-asset service providers in South Africa, Ehsani said.

In June, the Financial Action Task Force, a global standards-setting body of which South Africa is a member, issued “Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers”, which similarly provides a regulatory framework for the new industry, he added.