Bank of South Africa to terminate accounts of clients offering crypto arbitrage services
A leading South African bank would have sent account termination notices to multiple crypto clients. Depending on the local media, Standard Bank has sent notices to automated cryptocurrency arbitrage service providers.
The report noted that virtual currencies like Bitcoin trade at a higher price on South African exchanges compared to other places. This is similar to the concept of “premium kimchi” seen in South Korea.
Standard Bank actions have “rocked” the crypto industry in the country, according to reports. This is because several companies had taken advantage of the said “price gap”.
However, it should be noted that not all companies have taken equal advantage of arbitrage opportunities in the crypto space. Several factors, including economies of scale and withdrawal fees, determine profit. In addition, the report pointed out that there are regulations regarding the amount of money South African residents can send abroad without seeking permission from the central bank.
Shiftly co-founder Carel de Villiers told the publication that Standard Bank also denied his request to open an account. He noted that lenders “don’t bank (with) companies with an arbitrage business model.” But, he alleged that the bank has a relationship with its competitors.
Revix Founder Sean Sanders said:
“The banking risk for crypto players is astronomically high without regulation.”
The report speculates that this is a South African Reserve Bank crackdown on the industry. The bank has denied the allegations.
“Standard Bank is committed to treating its customers fairly and constantly strives to strike the right balance between maintaining customer relationships and complying with regulations. “
In 2019, FirstRand Bank also had would have closed accounts of the country’s major crypto exchanges, including Luno, ICE3X, and VALR.
Why does South Africa have these arbitration opportunities?
Prices are a function of supply and demand in national trade. Channel analysis report previously said South Africa has one of the highest popular adoption rates in the world. Moreover, by 2021, the country’s market had grown by more than 1,200% in value compared to the previous year. Therefore, the higher price of Bitcoin in South Africa may indicate higher demand than the available supply.
Werner van Rooyen of the Luno crypto exchange previously said,
“We just provide the platform on which buyers and sellers interact. The forces of supply and demand ultimately determine the price.