The Prudential Authority of the Reserve Bank of South Africa reportedly issued guidelines to its subsidiaries in a bid to minimize illicit activities, with encouragement for banks to keep ties with cryptocurrency. 

Specifically, the guideline reportedly came up with recommendations claiming that an act of cutting ties entirely could result in an increased level of risk in the long haul.

The official notice reportedly received the signature of Prudential Authority CEO Fundi Tshazibana. Previously, a few particular South African banks had removed their associations with crypto asset service providers (CASPs) – what they are called in the document – citing reasons related to uncertain regulations or a high-risk factor.

Nonetheless, the notice emphasizes that risk assessment does not mean distancing fully away from crypto. 

“Risk assessment does not necessarily imply that institutions should seek to avoid risk entirely (also referred to as de-risking), for example, through wholesale termination of client relationships which may include CASPs.”

It further remarks that a move like that could even be a “threat” to general financial integrity, since it may place limitations on the possibilities of treating issues such as money laundering.

In late July, the Reserve Bank reportedly issued an assessment of risks within the local banking industry. Per the report, cryptocurrencies and virtual assets made the list of top 10 threats identified by the top local banks.

Prior to the report, the South African authority reportedly introduced a plan that provide the classification of crypto as a financial asset for regulatory purposes. The laws pertaining to the classification are expected within the next 12 months.

South Africa-based crypto exchanges have reportedly shown positive reactions to this announcement. Several shared a belief that this initiative will amplify adoption in the nation. 

The country has reportedly witnessed significant signs of interest and innovation in the crypto community, including “in real life,” or IRL, crypto use cases.