← Go back Sep 09, 2023
South Africans were hit wave after mutinous wave of crypto disappointments in the last year, the latest being the decision by a banking partner of US-based exchange Kraken to stop accepting deposits from South Africans, apparently because SA is seen as a risk for money laundering. Suddenly, the consequences of SA’s ‘greylisting’ in February 2023 by the Financial Action Task Force (FATF) for its lack of compliance with international standards on money laundering and terrorist financing became all too real for South Africans accustomed to easy transfer of funds to overseas crypto exchanges. That was the latest in a string of crypto earth tremors. Earlier this year Circle, the issuer of the USDC stablecoin, likewise stopped accepting deposits from SA, apparently in anticipation of tougher regulatory oversight. Again, the shadow of the FATF greylisting appears to have influenced its decision. The FTX exchange went down in spectacular style in November 2022 in what we now know was a gigantic fraud, and this was followed by the failure of crypto-linked banks Silvergate and Signature. “These failures have left a number of crypto trading firms in South Africa stranded and unable to continue some of their operations. This is especially true of those offering cryptocurrency arbitrage who rely on exchanges like Kraken to execute arbitrage trades,” says Jon Ovadia, CEO of . “We anticipated that this might happen, and that overseas exchanges might start clamping down on deposits from SA. This is why we have worked tirelessly to ensure our offshore facilities are both robust and reliable. We planned for this, and we fortunately have been able to stay fully operational, despite all the market turbulence. We have a rigorous vetting process for all our counter-parties and always make sure we have multiple redundancies in place.” Disruptions such as those mentioned above have caused several exchanges to pause or halt some of their services. Ovadia says was able to remain 100% operational at all times, despite the calamities that beset the crypto market over the last year. “We remained 100% operational at all times which is a massive achievement in this market. This is important not just for continuity of service, but because it allows our clients to seize opportunities when they occur, whether these were trading or arbitrage opportunities.” Stablecoins are pegged to currencies such as the US dollar, rand and euro, and are often used by crypto traders to park profits in a ‘stable’ currency while waiting for another opportunity to re-enter the market. Shipping funds across borders typically involves interacting with third parties, whether crypto exchanges, custody providers or banks. Many crypto investors were shocked to discover that the interest they were earning on their cryptocurrencies was in fact coming from third parties that had not been properly vetted, or had gone rogue. “We have a $50 million balance sheet; we’re profitable. We take the counterparty risk rather than pass it on to the client – if something goes wrong,” says Ovadia. “We do extensive due diligence on all our counterparties as part of a rigorous risk management framework. Further than that, we limit our exposure to counterparties so a potential failure among any one of them does not seriously impact our operations.” OVEX’s $500 million (R9.3 billion) monthly trading volume is evidence of the deep liquidity it is able to provide traders, family offices and institutions, adds Ovadia. The coming regulation of the crypto industry in SA will go some way to weeding out bad actors, says Ovadia. OVEX already has a Category 1 licence from the Financial Sector Conduct Authority (FSCA) and is authorised by the SA Reserve Bank (Sarb) to facilitate international payments. It is also fully licensed in Dubai and Australia and is currently applying for licences in several other jurisdictions, says Ovadia. OVEX operates an that allows users to buy and sell large volumes of cryptocurrencies instantly at a single, competitive price. Anyone trying to purchase 100 bitcoin (currently valued at about R50 million) on a retail exchange may have to wait days to complete the trade, which will be executed at multiple different prices. This is because retail exchanges lack the liquidity to execute such large volumes in a single bite.
Read more: moneyweb
