New law to force licensing of cryptocurrency traders
Mbongeni Mguni | Monday January 24, 2022 06:00
Known as the Virtual Asset Bill, the proposed law was gazetted on December 23 and is one of 16 bills to be tabled before the January 24 emergency sitting of Parliament. Many of the 16 bills are designed to enhance the country’s adherence to the highest global anti-money laundering and combatting the financing of terrorism standards.
In a preamble to the new Bill contained in the Extraordinary Government Gazette, Finance and Economic Development minister, Peggy Serame explained that the proposed legislation is intended to regulate new and developing virtual assets businesses.
A virtual asset is defined as “a digital representation of value that may be digitally traded or transferred, and may be used for payment or investment purposes”. A virtual asset can also be one that “is distributed through a distributed ledger technology where value is embedded or in which there is a contractual right of use, and includes virtual tokens”. Both of those definitions cover cryptocurrencies, the increasingly popular but unregulated instruments that have grown into a trillion-dollar business globally over the years. “This Bill makes provisions for managing, mitigating and preventing money laundering and financing of terrorism and proliferation risks associated with virtual assets and new emerging business practices and technologies,” Serame said The Bill’s scope covers anyone that offers a virtual asset service to persons resident in Botswana, “irrespective of their physical location, whether in or outside Botswana”.
One of the Bill’s clauses states that a person shall not carry out or participate in a virtual asset business unless the person is the holder of a virtual asset service provider licence. Anyone who carries on a virtual asset business without licensing is liable to a P250,000 fine, up to five years in jail or both. While the Bill appears targeted at stamping out money laundering and financing of terrorism done via virtual assets, the new legislation comes as NBFIRA raises the alarm on growing scams involving cryptocurrencies.
The new Bill expands NBFIRA’s mandate to include licensing virtual asset service providers as well as regulating and monitoring the issuance of virtual assets and persons conducting virtual asset businesses in Botswana. NBFIRA is also being tasked with developing rules, guidance and codes of practice in connection with the conduct of virtual asset businesses.
The regulatory authority recently partnered with the Botswana Investment Professionals Society to raise awareness on cryptocurrency and forex scams, which are reportedly trapping more victims in the country. “We have had complaints about people putting in thousands of pula into an electronic platform somewhere with people that they did not know and at some point, they seemingly get returns which entices them to put more money,” Juliana White, NBFIRA’s Capital Markets director previously told BusinessWeek. “This goes on for sometime, then all of a sudden that platform disappears and the victims come to us saying they have put so much into the scheme and the site is nowhere to be found.” While the most popular cryptocurrency, Bitcoin, does not require third party traders to access, a number of traders are marketing alternative cryptocurrency into Botswana.
This week, NBFIRA said it was currently not in a position to make a public statement about the proposed Virtual Assets Bill as the legislation was yet to be presented to the National Assembly. Local players involved in cryptocurrency said the new Bill would be difficult to enforce as much of the trade takes place in real time and without the engagement of third parties. “There is no Bitcoin headquarters or Bitcoin America office registered somewhere and you cannot expect a Bitcoin Botswana to be registered and licensed offering that to Batswana,” one analyst said. Some, however, do have a physical presence, such as Nigeria’s Yellow Card which is pioneering an Africa-wide crypto-network. Yellow Card says it has a team of 110 employees in 16 countries, adding that the product “makes it easy for anyone, anywhere in Africa to buy crypto using cash, mobile money, card or bank transfer”.
Last February, Yellow Card suspended services in its home market after the Nigerian central bank prohibited commercial banks and all financial institutions from interacting with cryptocurrency entities and individuals. The ban has since been relaxed after the Central Bank of Nigeria issued its own cryptocurrency known as eNaira. The Bank of Botswana, meanwhile, has previously described cryptocurrencies as “speculative assets without the backing of any underlying economic activity”.