A disconcerting scenario has unfolded for crypto enthusiasts in South Africa, raising concerns about the country’s susceptibility to money-laundering activities. Cryptocurrency exchanges within the nation have sounded the alarm, revealing how it has become a hotbed for illicit financial practices. Recent developments reveal that US-based crypto companies have initiated stringent measures, causing disruptions in deposits and payments for South African users.
A local source recently reported that Kraken, a prominent cryptocurrency exchange, has suspended the acceptance of deposits from its South African users. This decision was prompted by the exchange’s banking partner adding the nation to its anti-money laundering blacklist. This move aligns with the Financial Action Task Force’s [FATF] decision, which categorized South Africa as requiring “Increased Monitoring” and placed it on the “grey list” in February of the current year.
Circle, the issuer of USDC [USD Coin], had also taken proactive measures earlier this year by halting fiat payments from South African users. This decision was made in anticipation of potential financial sanctions against the nation. These actions reflect the ripple effect of FATF’s designation, illustrating how regulatory decisions can influence the operations of cryptocurrency entities.
South Africa: Navigating Stormy Waters
Considering these circumstances, Kraken’s cautious approach toward facilitating transactions from South African users is understandable, aiming to avoid any involvement in potential money-laundering schemes, especially those concerning cryptocurrencies. However, these regulatory and technical interventions have cast a shadow on crypto arbitrage, a popular practice in the country.
Although part of a broader global effort to curb money laundering activities, it’s important to recognize that South Africa has experienced instances of high-profile money smugglers utilizing banks and bribes for money laundering, along with notable fraud cases such as the 2021 theft of 70,000 Bitcoins from the Africrypt platform owned by the Cajee brothers and the fraudulent MLM scheme Mirror Trading International Proprietary.
Adding to the landscape, South Africa’s financial market watchdog, the Financial Sector Conduct Authority [FSCA], recently declared that digital asset trading platforms must operate with a license by year’s end. Failure to comply could lead to closure or fines. This dynamic regulatory environment underscores the ongoing efforts to ensure transparency and accountability within the cryptocurrency realm.