Capitec blocks payments to cryptocurrency exchanges

Capitec has blocked EFT and immediate payments to cryptocurrency exchanges from its smartphone app and business web interface.

The issue was first highlighted by Shiftly co-founder and CEO Carel de Villiers.

When MyBroadband asked Capitec about the change, the bank said it was an anti-fraud measure.

“Capitec is committed to protecting our clients from fraud, which is why we made the decision to block EFT and immediate real-time clearing payments to crypto exchanges on our app and business web interface,” a spokesperson said.

“We recognise the increasing interest in cryptocurrencies and encourage users to utilise Capitec Pay as a secure alternative for transactions.”

Capitec said it was actively working with crypto exchanges that have not yet integrated Capitec Pay to expedite this process.

“Ensuring the safety and security of our clients’ financial transactions remains our top priority,” it said.

This change came after Capitec announced that its app now communicates with its Fraud Center in real-time.

It said the app will warn customers and block payments in real time if any beneficiaries have reported or confirmed fraud against them.

For example, even brand new bank accounts created at any institution will be blocked for all Capitec clients if there is confirmed fraud reported against it.

According to Capitec, it is the first bank to do real-time and on-the-wire interception and blocking of suspicious payments to protect clients.

Farzam Ehsani, the co-founder and CEO of cryptocurrency exchange VALR, said only Capitec was limiting payments to crypto platforms this way.

He advised Capitec customers funding their VALR account to use a South African credit card, or use another bank account.

Based on Capitec’s feedback, regular retail customers should be able to fund their crypto accounts by EFT using Capitec’s web banking interface.

This change from Capitec is reminiscent of South African banks blocking clients from buying cryptocurrencies on international exchanges with their credit cards.

However, in that case, the Reserve Bank’s Financial Surveillance Department compelled them to do so.

The banks told MyBroadband that South Africa’s exchange control regulations do not permit people to buy crypto assets overseas using their credit or debit card.

The Financial Sector Conduct Authority (FSCA) declared crypto assets a financial product on 19 October 2022.

Since then, the regulator said it had seen a reduction in cryptocurrencies being used to perpetrate fraud.

It also opened applications for South Africa’s new Crypto Asset Service Provider (CASP) licences last year.

The FSCA reported receiving 374 licence applications before its November deadline.

Any entity that lodged their application before the deadline could continue trading until their request was assessed.

In July, the FSCA revealed that it had awarded 138 CASP licences thus far.

A recent FSCA study showed that nearly 10% of South Africans (5.8 million people) own crypto assets, with Cape Town having emerged as the preferred base for crypto asset entrepreneurs.

The report indicated that the highest monthly transaction value for crypto assets was over R8 billion in November 2022, with the average in December 2022 being approximately R500 million.

The Financial Intelligence Centre (FIC) stated in its annual report released last month that it would conduct inspections on CASPs to assess compliance with the FIC Act (FICA).

It also said that it would continue to monitor the registration and reporting of financial intelligence by CASPs.