South Africa’s First National Bank (FNB) bank has announced that it will be shutting down accounts linked to cryptocurrency exchanges.
In the process of cracking down on cryptocurrencies, banks themselves are experiencing the heat of negative interest rates and billions in fraud. Could cryptocurrencies and Distributed Ledger Technologies (DLTs) be a way to overcome these problems?
Local media outlets report that South Africa’s First National Bank (FNB) has notified cryptocurrency exchange that its associated bank accounts will be shut down. These exchanges include Luno, ICE3X, and VALR.
In a letter sent to these exchanges, the bank said that it would no longer provide banking services after considering its risk appetite.
The decision will come into full effect in March 2020 and was confirmed by officials from the Luno exchange.
Exchanges have notified users that they themselves would not be affected.
Cryptocurrencies Solve Modern Banking Issues
The decision to shut down accounts linked to cryptocurrency exchanges is similar to an order meted out by Indian authorities, who asked banks to stop serving cryptocurrency exchanges.
In India, this strict measure has had a noticeable impact on the market. Though pro-cryptocurrency individuals and groups have lobbied against the measure, stating that it stifles innovation and puts India on the backfoot when it comes to emerging technologies and the digitization of the economy.
Yet, India’s state banks have themselves experienced over $14 billion in fraud in the last six months alone. Proponents of cryptocurrency have pointed to the fact that with Distributed Ledger Technologies (DLTs), such problems would not have arisen — while it is claimed by anti-cryptocurrency forces that cryptocurrencies would encourage illegal financial activity.
German Banking Behavior
Meanwhile, in Europe, German co-operative bank, Volksbank Fürstenfeldbruck, has passed on the cost of negative rates to retail customers with small deposits — with over a fifth of all German banks doing the same. The European Central Bank introduced the negative interest rate policy in 2014, which effectively makes account holders pay for storing their savings in banks.
Such unethical behavior that affects those who are in the worst financial position is precisely the kind of behavior that cryptocurrencies were designed to oppose. Banks have repeatedly displayed issues of centralization that cryptocurrency enthusiasts rail against — whether that be freezing accounts or through negative interest rates.
Cryptocurrencies have been praised for their censorship resistance, their non-custodial nature, and the freedom that they bring to their users. In almost every which way, they better traditional banking mechanisms — which is why it sees such ardent lobbying from those in India and other countries experiencing similar turmoil with respect to regulation.
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