The premium on crypto assets listed on South African exchanges briefly surged to 3.5% after one of Kraken’s banking partners, Bank Frick, started blocking deposits from users based in the African country. Some South African crypto experts have linked the decision to the Financial Action Task Force’s recent addition of the African country to its greylist.
South African Crypto Premium Surges After Specific Banks Stop Processing Payments
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Editor’s Note: This article has been updated to reflect a comment from Kraken which says the issue only affected a specific banking partner and said “Kraken is still available in South Africa and deposits have not been blocked.”
Impact of the FATF’s Greylisting
According to a report, after Kraken had issues with a banking partner not accepting deposits from the region, South African nationals briefly saw the premium on crypto assets like bitcoin surge to 3.5%. Before the revelation, the premium or arbitrage, which is the gap between prices of crypto assets on global exchanges and South African exchanges, had reportedly ranged between 0.7% and 1.5%.
As explained in a report published by Moneyweb, Kraken made the decision to block specific deposits using this bank after its banking partner placed the African country on its anti-laundering blacklist. Some South African commentators have linked the banking partner’s move to the Financial Action Task Force (FATF)’s decision to place the country on its greylist. Kraken told Bitcoin.com News that South African citizens still can leverage the exchange’s other banking partner Etana.
Earlier this year, a Bitcoin.com News report said the African country had been added to the FATF’s greylist even after it designated crypto assets as financial products. Some analysts predicted that the move would affect South Africa’s ability to secure loans from foreign banks. At the time, the country’s central bank vowed to “strengthen its supervision and further enhance the dissuasiveness and proportionality of administrative sanctions issued.”
Meanwhile, the report by Moneyweb suggested that the recent issue had impacted many local crypto arbitrage market participants. However, according to the report, market participants such as crypto arbitrage and forex specialists like Future Forex have since found alternatives.
Commenting on the issue, which reportedly came a few months after Circle similarly stopped accepting deposits from South Africans, Omer Iqbal of Fivewest, a crypto arbitrage service provider, said:
“We don’t use Kraken, so our arbitrage services are unaffected. The premiums shot up on Monday [Aug. 28] because there are a number of different arbitrage companies using Kraken as their primary source of trading for their clients. Whenever you get restricted volumes, you get higher premiums, so this is good news for those [of] our clients who are not reliant on Kraken.”
Kyle Dowie, the co-founder of another crypto arbitrage provider Dooya is quoted in the same report stating that the issue had caught many players off guard. However, Dowie hinted that the arbitrage will eventually drop when Kraken unveils a new local banking partner.
This week, a Kraken spokesperson told Bitcoin.com News that “We communicated to clients earlier this week that Bank Frick, one of our funding partners, has recently changed their policy and are no longer processing payments from banks in South Africa. That said, affected clients can still use Etana, another funding partner, to deposit funds into their Kraken account.” The spokesperson added:
To be clear, Kraken is still available in South Africa and deposits have not been blocked.
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