Hideo Nakamura The premium associated with cryptocurrency assets on South African trading platforms briefly rose to 3.5% following Kraken’s unanticipated decision to halt deposits from South African users. Several experts in South Africa’s crypto landscape have attributed Kraken’s move to the country’s recent inclusion on the Financial Action Task Force (FATF) greylist.
Consequences of FATF Greylisting on Cryptocurrency Premiums
A recent report states that the decision by the U.S.-based cryptocurrency exchange, Kraken, to discontinue deposits from South African residents led to a temporary spike in cryptocurrency asset premiums, pushing them to 3.5%. Prior to this development, the premium, or arbitrage gap between cryptocurrency asset prices on global and South African exchanges, had been oscillating between 0.7% and 1.5%.
As detailed in a publication by Moneyweb, Kraken took the unexpected step of freezing deposits from South African users after its banking partner added the country to its anti-money laundering blacklist. Some commentators in South Africa have tied this banking decision to the FATF’s move to include South Africa on its greylist.
Earlier in the year, CryptokenTop.com News reported that despite categorizing cryptocurrency assets as financial products, South Africa was included in the FATF’s greylist. Analysts had projected that this categorization would negatively influence the country’s capacity to secure foreign loans. In response, the South African central bank pledged to “enhance the effectiveness and appropriateness of its supervisory measures and the administrative sanctions imposed.”
Kraken’s Action Follows Earlier Move by Circle to Exclude South African Residents
According to Moneyweb’s report, the sudden policy shift by Kraken has had repercussions on numerous local participants in the cryptocurrency arbitrage market. However, market operators like Future Forex, specialists in cryptocurrency arbitrage and forex trading, have reportedly found alternative routes.
Omer Iqbal of Fivewest, a service provider in crypto arbitrage, offered his perspective on Kraken’s move, which follows a similar decision by Circle months earlier. Iqbal stated, “Our arbitrage services have not been impacted as we don’t rely on Kraken. The premiums experienced an uptick on Monday [August 28] because several arbitrage firms use Kraken as their primary trading platform. A reduction in trade volumes typically leads to elevated premiums, which is beneficial for our clientele who are not dependent on Kraken.”
Kyle Dowie, the co-founder of Dooya, another cryptocurrency arbitrage service, noted in the same report that Kraken’s sudden announcement caught many in the market unprepared. However, Dowie suggested that the elevated arbitrage levels are likely to normalize once Kraken establishes a new local banking partnership.
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