$500 Bitcoin Premium in South Africa as Bank Announces Closure of Crypto Accounts

Francisco Memoria

A $500 premium on the price of bitcoin has developed in South Africa, shortly after one of the country’s largest banks announced the closure of cryptocurrency-related accounts.

According to local news outlet MyBroadband FirstRand, a South African bank with $93 billion in assets, informed cryptocurrency exchanges it has reconsidered its risk appetite and, as a result, decided to longer provide them with banking services. An excerpt from the letter FirstRand sent exchanges reads:

FirstRand Bank has been considering its risk appetite in respect of virtual currencies and virtual currency exchanges for some time. Within this context the bank has taken the decision to discontinue the provision of banking services to virtual currency exchanges and/or entities dealing/trading in virtual currency.

The develop will affect some of South Africa’s largest crypto exchanges, including Luno, AltcoinTrader, VALR, and ICE3X. Speaking to MyBroadband Luno Africa’s general manager Marius Reitz confirmed the bank is closing its account next year, but added it doesn’t anticipate it’ll impact costumers as it has other banking relationships.

The co-founder of VALR also confirmed it received the bank’s letter, adding it would affect “the entire cryptocurrency industry, including all exchanges as well as other entities dealing or trading in cryptocurrency.”

The affected exchanges, the news outlet reports, made it clear they have other banking relationships and noted the hope new regulations and guidelines will help the crypto industry move forward in the country.

In the trading platforms, however, a premium on the price of BTC has been developing. At press time one bitcoin is changing hands for 123,800 South African Rand (ZAR) (around $8,400) on AltCoinTrader and VALR, while CryptoCompare data shows BTC is trading at $7,890 across global exchanges.

Speaking to TrustNodes Richard de Sousa, AltCoinTrader’s CEO, stated:

The premium seems to be due to the high demand for Bitcoin in conjunction with the foreign exchange control imposed on South African citizens.

The news outlet reports South African citizens are legally allowed to send 1 million ZAR, worth around $67,900, out of the country per year. While citizens can apply for a special clearance to send out more, the process is reportedly filed with bureaucracy and as such it’s easier to just buy bitcoin.

On peer-to-peer exchange LocalBitcoins, the premium can be as high as $1,000, as traders are selling BTC for 130,000 ZAR. Interestingly the premium didn’t just develop for bitcoin. Ethereum is trading at 2,675 ZAR (around $180) on VALR, while on global exchanges ETH is trading at $168.

Featured image via Unsplash.