Byline: Hannah Parker
The National Assembly of Namibia has joined other African nations in embracing cryptocurrencies and digital assets as it recently approved a bill pivotal to the adoption of crypto. The objective of the approved bill aims to legalise and regulate assets, cryptocurrencies and virtual asset service providers (VASPs) in Namibia, which the lower House of Parliament enacted on June 22nd 2023.
The purpose of the law is to create a system for licensing and regulating VASPs. The regulation seeks to appoint a regulatory authority responsible for supervising these providers and their activities. The new bill intends to safeguard consumers, prevent market abuse, and reduce the potential for illegal activities like terrorist funding, money laundering and proliferation in the digital asset market. Ancillary concerns that arise will also be covered in the legislation.
Namibia’s Move to Safeguard Interests
According to a local press report by experts at Bitsoft 360 ai, the law is awaiting publication before it can take effect. The new law’s implications are far-reaching and extend beyond just the recognition of digital assets. The Minister of Finance and Public Enterprises, Lipumbu Shiimi, elaborated on the bill’s key components of creating a regulatory agency to oversee VASPs in the country and provide licences to those that meet specific criteria.
According to media reports, noncompliant providers could face penalties of up to 10 million Namibian dollars ($671 572) and ten years in prison. The Bank of Namibia, however, maintains its position that cryptocurrencies are not recognised as legal cash in Namibia, and the burden of risk associated with them lies with the individual.
The Rise of Digital Assets
The Bank of Namibia (BoN) remains cautiously optimistic about the growing presence of digital assets. The BoN’s Director of Strategic Communications and International Relations, Kazembire Zemburuka, highlighted the potential benefits digital assets bring to the bank, including increased financial inclusion, improvement of payment system resilience and enhancement of cross-border payments.
Zemburuka revealed that once the associated risks of innovation, like virtual assets, are safely managed, the bank may assess and decide on their acceptance of digital assets. Moreover, the financial sector in Namibia welcomes this legislative advance. Investment Consultant at RisCura Consulting, Jesaya Hano-Oshike, emphasised that the legislation protects against fraud and money laundering. He noted, “The legislation should not impose unnecessary restrictions that could hinder local innovators from developing digital assets and businesses within the country”.
Linking Innovation and Risk Management
A financial Analyst at High Economic Intelligence, Arney Tjaronda, highlighted the delicate equilibrium between innovation, growth and risk management. Bringing attention to the surge of central bank digital currencies (CBDCs) could reshape how transactions are conducted and monitored, promoting financial stability and reducing risks related to conventional banking systems. Tjaronda said, “Digital currencies, such as Bitcoin, Ethereum, and Litecoin, have gained widespread attention, and their impact on monetary policy cannot be ignored”. He added that “digital currencies offer the potential to facilitate cross-border trade and remittances by providing faster, cheaper, and more secure payment solutions. This has the potential to enhance economic cooperation and international transactions”.
On September 17th 2017, the bank made it clear that it was against using cryptocurrencies as a method of payment for services and goods based on 50-year-old law. Part of the Exchange Control Act in 1966 noted, “In assertion to the bank not recognising virtual currencies as legal tender in Namibia, it also does not recognise it to be a foreign currency that can be exchanged for local currency”. The Act also stated, “This is because virtual currencies are neither issued nor guaranteed by a central bank nor backed by any commodity”. The bank clarified that virtual currency exchanges have no place in Africa under decades-old legislation.
The central bank said, “It cannot endorse any activity involving virtual currencies, despite their ability to facilitate remittance and other consumer payments due to lack of legal premise. Virtual currencies cannot be used to pay for goods and services in Namibia”. The bank added, “A local shop is not allowed to price or accept virtual currencies in exchange for goods and services. Users of virtual currencies should, therefore, exercise caution when dealing in this type of currency or when comparing it to e-money”. In its position paper, the BoN cited previous reports by the International Monetary Fund (IMF) and the Financial Action Task Force (FATF).
In Africa, countries like Nigeria, Kenya, South Africa, and Tanzania are the pioneers of cryptocurrency. Still, as the world of digital assets spreads, places like Namibia are starting to grow and show interest in crypto. The embrace of crypto regulation in Namibia reflects its recognition of digital assets’ potential benefits and challenges. The country intends to protect consumers and combat money laundering while fostering an environment for innovation. This move shows a significant step forward for the country in digital finance and demonstrates Namibia’s commitment to adapt and thrive in the digital world.