The Prudential Authority of the South African Reserve Bank has instructed its auxiliaries to stop severing relationships with crypto-related firms. It warned that doing so may expose the nation’s economy to financial instability.

Reserve Bank Authorities Says Dumping Crypto Is Risky

According to reports, the banking authority in SA recently released new guidelines for its subsidiary. In the guidelines, the regulator encouraged their associates to avoid cutting ties with customers involved in cryptocurrency.

It added that such action could pose more risks to the nation’s financial integrity eventually. Fundi Tshazibana, the CEO at Prudential Authority, appends the official notice.

According to reports, banks in South Africa have a common practice of severing relationships with firms providing crypto services. They do this because crypto trades are highly-risky, and no clear regulations are backing the industry.

Nonetheless, the notice enlightened them that they don’t have to desert crypto to manage risk completely. It also added that during risk assessment, firms don’t have to avoid risk totally. 

It went on to say terminating client relationships can pose more threat to the overall financial integrity. Besides, such an act could limit the chances of being alert to solve possible problems like money laundering.

Assessment Showed many Local Banks Consider Crypto Risky

Late last month, July, the Federal Reserve Bank of South Africa issued a risk assessment to its local banking ecosystem. According to the review, many local banks indicated cryptos and digital assets as part of the top 10 threats they face.

Before they disclosed the report, the country’s officials had classified cryptocurrency as a financial asset under the law. However, they are yet to release the rules that would build crypto conduct as a financial asset. 

Nonetheless, the officials said they would release the regulatory framework within 12 months. Furthermore, many crypto investors and exchanges reportedly showed positive sentiments when the officials made the announcement. 

They were delighted because they believed the positive news would improve crypto engagement and adoption in the region. In addition, statistics have shown a significant increase in the numbers of innovations and investors in the industry. 

South Africa is home to many prominent and thriving crypto projects like Bitcoin Ekasi. Bitcoin Ekasi introduced and exposed the locals’ settlements to ways they can gain financial freedom and also develop their community through Bitcoin. During its mission, the firm innovated a pro-crypto travel firm, Unravel Surf Travel, based in South Africa.