Opinion by IT News Nigeria:
After over 2 years of “unbanking” crypto exchanges, South Africa, in a rare twist, recently issued new regulations to local banks to allow their platforms for crypto transactions.
For Nigeria, it has been since February 2021 that central Bank banned crypto trading and ordered banks to close operating accounts. Till now nothing has changed.
But what has influenced South Africa’s Reserve Bank’s Prudential Authority (PA) to issued a “guidance note” to local banks saying they should provide banking facilities to crypto exchanges?
Well, it could only be response to reality and, most fittingly, responsive regulation. It is becoming clear to many governments across the globe that it is far more reasonable and pragmatic to follow technology rather than try to stifle it.
To this end, the guidance note by South Africa, entitled “Supervisory guidelines for matters related to the prevention of unlawful activities, is seen as a great lip forward crypto, the country and for for the banks themselves in one of Africa’s power economy.
It is said that the move is particularly helpful for companies in the crypto space that are responsibly striving to protect products that serve people. This is true as there are numerous emerging services within the crypto ecosystem. They realised that blanked ban only serves to cut off a nation’s economy from thriving innovative financial and tech services within the crypto blockchain.
Furthermore, it is also clear that it is now “time to bank crypto companies” because exchanges represent massive boosts to host economies in this regard.
Again, many countries have steer clear of crypto citing associated risks. According to SA, risk assessment by the banks “does not necessarily imply that institutions should seek to avoid risk entirely (also known as de-risking), for example, avoiding crypto businesses because of related risks. It fair and better to mitigate the risks while take advantages of the opportunities.
The need for discretion
Government and regulators should leave space for banks to act with discretion in this regard, by allowing banks to assess themselves if the risk posed by cryptos businesses is too great to manage successfully. In this case, the decision to de-risk should only be made after careful due diligence and consideration.
Regulations should be aimed at issuing guidance linked to the treatment of crypto assets ‘based on the application of a thorough risk-based approach’.
Regulators should guide banks to ‘evidence an understanding of what elements are driving or reducing money laundering and other risk within crypto assets’ as against having a blanket ban on banking crypto companies.
It must be clear that risks and other bad actors obviously still remain in the crypto industry as they do elsewhere, and banks won’t immediately start banking all crypto companies.
Directed regulation or guidance should take Nigeria in the right direction in allowing new technologies and innovation to flourish in the nation’s tech industry swarming with innovations and startups.
Start-ups and others businesses plus crypto related services remain critical growth channels for the economy.
For Nigeria, as said at the outset, it has been a year and half since the crypto banking ban, and the outcome is now clear to all. First, the ban has extracted liquidity from sane, formalised exchanges, and pushed it into the black market where there is anonymity. It is most sensibly the right time to do the right thing.