Will the new cryptocurrency Bill sweeten or sour the industry?
Mbongeni Mguni | Monday January 24, 2022 06:00
Mmegi: How feasible is it that the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) would attempt to license companies offering virtual assets such as cryptocurrencies to Batswana, given that in most cases these products are not offered by registered companies?
Moumakwa: For people who understand the principle behind cryptocurrency as established by its originators, licensing will always be interesting. However, licensing itself is not a strange intention. Virtual assets, especially cryptocurrencies, which are the real target of the Bill, are a specialised, highly technical area. Therefore, it is not entirely surprising that one would think of a licence because of the nature of the business, which plays in the financial services ground. Big cryptocurrency providers like Coinbase in the United States of America, are licensed to provide their services.
Mmegi: What impact could this Bill have on virtual assets such as cryptocurrencies in Botswana?
Moumakwa: It is hard to tell at this point! But one is tempted to think it could actually promote the participation of the citizenry in crypto and this is for two reasons. Firstly, many Batswana are still smarting from the bruises of illegal scams posing as crypto investment opportunities. Some of these people still wish to participate in genuine crypto investments, but they are scared. The Bill will be a welcome development for such people, but only if its rigour does not make it difficult for cryptocurrency providers to set up. These people will not touch crypto again, unless there is a trusted licensed middleman.
The second reason is your “average” Motswana who is always led by government. These are people who never thought of participating in crypto or even knew about it. This type of citizen who typically listens to Radio Botswana will get interested the moment cryptocurrency investment becomes part of government language.
Otherwise, you have the typical cryptocurrency addict who is already active in the market. This one understands the environment very well and doesn’t need any middleman.
At a broader scale, however, the Bill could make Botswana less attractive as a crypto investment destination. Money goes where it is loved, so if crypto investors consider this Bill hostile, they will just stay where they are or go elsewhere. Look what happened when China banned cryptocurrency? Most of the crypto mining equipment ended up in Texas, California, Kazakhstan, and other crypto-friendly jurisdictions. So, the Bill itself will not have any impact except perhaps to make it cumbersome for cryptocurrency businesses to set up a physical presence in Botswana. Cryptocurrency is 13 years old this year and you still can’t talk of any significant presence of virtual businesses locally. The important thing about regulation, good or bad, is that it takes uncertainty out of the whole thing. Most importantly, for the cryptocurrency enthusiasts out there, the Bill is a significant acknowledgement of this new “asset” class by government and not just a fad that critics would like to make it.
Mmegi: How enforceable does the Bill appear to you?
Moumakwa: For what it intends to do, which is to regulate the virtual assets business in Botswana, it may be enforceable with all the necessary education and capacitation that needs to be done. It is the authority charged with regulating these businesses that will have its hands full. Many countries, both developed and developing, are currently waiting on the sidelines and studying this new innovation before regulation. There is a reason the US Congress only incorporated cryptocurrency in the Infrastructure Bill of 2021, although they are the birthplace of cryptocurrency. They knew they will get a share of the trillions currently spinning in this new sector.
But when you look at our government’s proposed Bill, it seems highly skewed towards consumer protection at the expense of everything else. It briefly mentions promotion of virtual assets business, but for a multitrillion dollar sector that cryptocurrency is, it would be good to hear how government plans to milk this new gold mine for job creation and the much-needed revenue.
Mmegi: The Bill appears to classify cryptocurrencies and others as “assets” which is a first for Botswana as the Bank of Botswana has refused to classify them as such. What is the significance of this new classification?
Moumakwa: The first thing you want to avoid when coming up with regulations is to avoid confusion, especially amongst the enforcement institutions. Hopefully the legislators are ready to pick some of these glaring contradictions right off the bat. Lack of regulatory clarity and keenness to enforce, is the reason the United States Securities & Exchange Commission is currently in a prolonged legal tussle with one of the big crypto companies, Ripple.
The important thing to remember is that not all cryptocurrencies are created equal. They have different use cases. So, on this and other matters, we can only wish the originators of the Bill good luck!
Botswana just came out of a debilitating grey-listing by the financial principals, so one understands the pressure to be “good kids”. But these are new waters that require caution and a lot of learning. Relevant US Congress committees are lately conducting hearings to be educated by CEOs of cryptocurrency companies about this new sector, a path that our government should not be shy to take.
Unfortunately this one is not your typical consultant-driven path, but rather requires real, genuine practitioners to guide law-makers.
*Moumakwa is the pseudonym of a local cryptocurrency expert. He has requested anonymity for professional reasons