The premium on crypto assets listed on South African exchanges briefly surged to 3.5% after Kraken’s abruptly started blocking deposits from users based in the African country. Some South African crypto experts have linked Kraken’s decision to the Financial Action Task Force’s recent addition of the African country to its greylist.
Impact of the FATF’s Greylisting
According to a report, the U.S.-based crypto exchange Kraken’s recent decision to stop accepting deposits from South African nationals briefly saw the premium on crypto assets like bitcoin surge to 3.5%. Before Kraken’s announcement, 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 sudden decision to block South African deposits after its banking partner placed the African country on its anti-laundering blacklist. Some South African commentators have linked the unnamed banking partner’s move to the Financial Action Task Force (FATF)’s decision to place the country on its greylist.
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 snactions issued.”
Kraken Follows Circle in Blocking Deposits by South African Residents
Meanwhile, the report by Moneyweb suggested that Kraken’s abrupt decision 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 Kraken’s decision, 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 Kraken’s announcement had caught many players off guard. However, Dowie hinted that the arbitrage will eventually drop when Kraken unveils a new local banking partner.
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