SA’s banks should think twice about closing down the bank accounts used by crypto asset service providers, such as exchanges where you can buy and sell bitcoin, the Reserve Bank's Prudential Authority (PA) has told them.

Business Insider reports that this is because it could make problems such as terrorism financing, money laundering, and nuclear proliferation worse.

The PA this week sent banks a ‘guidance note’ – receipt of which must be acknowledged, in writing, by the CEO of every bank and their external auditors – on how they should guard against being used for nefarious finance purposes.

It knows that ‘certain banks in SA have previously opted to terminate the bank/customer relationship’ with what it refers to as crypto asset service providers, the regulator said. It believes that may be because they are avoiding the risk of dealing with such services, or because there isn't formal regulation for how they should deal with crypto exchanges – and also because they just don't trust crypto players.

However, the PA is not necessarily a fan of this approach to ‘de-risking’.

Shutting down accounts wholesale ‘could potentially create opacity in the affected persons' or entities' financial conduct’, it said.

This ‘eliminates the possibility to treat’ the big three fears in illicit finance: money laundering, terrorism financing, and the risk of nuclear proliferation.

The PA would rather see banks look at individual crypto assets and crypto providers, and categorise the risk of each.

Full Business Insider report