The United Africa Blockchain Association (UABA) said it is saddened to hear that First National Bank is terminating its banking services to virtual currency exchanges and intermediaries trading in virtual currency.

In November 2019 the bank issued a statement to ITWeb confirming the development "following a comprehensive review of the potential risks currently associated with these entities, particularly given that appropriate regulatory frameworks are not yet in place."

As reported by ITWeb, the statement continued: "The decision to terminate our banking services to these entities does not apply to individual customers. Due to the confidential nature of our customer relationships, FNB cannot provide any information on specific bank accounts."

According to UABA, while South Africa does not currently appear to have any laws regulating custodianship of cryptocurrencies, the Crypto Assets Regulatory Working Group, in its January 16 released Consultation Paper, proposed regulatory action that would encompass this area of activity.

As a first phase of building the appropriate regulatory scheme, the Group proposed the registration of entities performing various activities including "crypto asset digital wallet providers (custodial wallets) and a crypto asset safe custody service providers (custodial services)."

UABA further stated: "Registration process for crypto asset service providers was expected to be implemented by first quarter of 2019. This to our best of knowledge is yet to take place. Then it would be followed by review of existing regulatory frameworks followed by new regulatory requirements or amendments to existing regulations. Thus far there hasn't been taken."

"There is currently no FinTech regulation for crypto assets nor are crypto assets are also prohibited. Most of the financial sector legislation which applies to financial products and financial services pre-dates crypto assets and other digital assets and it is therefore not surprising that none of the financial sector laws dealing with the issue and sale of financial products apply (at least not expressly) to crypto assets."

The organisation added that the Intergovernmental Fintech Working Group (IFWG) and Crypto Assets Regulatory Working Group (CARW) have provided a roadmap proposed regulation.

"However, it is not enough for regulators and stakeholders to rest on their laurels. It must be followed through so that all financial services providers and crypto assets service providers are rest assured in their endeavours," said UABA.

"As UABA we are hopeful that with defined regulations and taking in consideration the increasing leaning towards a regulatory playing field for the crypto space in South Africa and globally, FNB will surely return. Furthermore, banks have a role to play as partners to relevant stakeholders in facilitating and promoting emerging financial technologies. The sector is enjoying unprecedented growth and is potentially a key sector to youth employment. Just as the banking sector partnered with economic drivers in the past, they must raise to the occasion more so now as the country seeks to find solutions to the economic malaise. Capitulating to market fears and uncertainty will likely choke the entrepreneurial spirit being fostered by financial technologies."

Exchange response

South African cryptocurrency exchange AltCoinTrader issued a statement shortly after news of FNB's decision broke and said they have been banking with FNB since 2015, and despite this long and credible history, were very surprised by the bank's decision to terminate all services across the board.

Chief executive officer Richard de Sousa said they are disappointed, and pointed to international pressure for the termination.

"We are disappointed that a financial institution would succumb to international pressure like this, with banking services being denied to individuals and industry players around the globe."

De Sousa confirmed that AltCoinTrader has implemented multiple fiat options since inception, and has never at any point relied on just one specific bank: "We have solidified relationships with other major institutions, and believe that further engagement is necessary. A close working relationship always increases trust and understanding when dealing with emerging technologies like cryptocurrencies."

He added that the company continue to work alongside the South African regulators and hoped that in the future FNB would reconsider their position. AltCoinTrader confirmed that the termination of FNB banking services is anticipated to only take place in March 2020, and they've committed to notify their customers via numerous social media platforms and on their website once they gain clarity on the given timelines.

"We want to inform our FNB customers that we have not given up and will continue to fight for their banking rights," de Sousa concluded, "We believe that the limitations set on the industry will only drive innovation. Customers can be assured that it is business as usual and challenges, whilst sometimes unexpected, are not uncommon in such a nascent industry."