THE Bank of Namibia (BoN) says cryptocurrencies do not have legal tender status in Namibia as the bank does not recognise the use and acceptance of Virtual Assets (VAs) as legal tender or electronic money.
According to a statement from the bank’s director, strategic communications and international relations, Kazembire Zemburuka, the definition of payment instruments in the Payment System Management Act, 2003, as amended, does not extend to VAs.
He was reacting to claims by Windhoek forex trader Ginnovani van Wyk that crypto currencies are the method of exchange for the future and a new generation currency which has made money more available in the digital space.
Economist Theo Kein said cryptocurrencies aim to address inefficiencies in the traditional banking sector by increasing the speed at which international or cross-border payments are made, reducing transaction costs and being more inclusive.
“However, the acceptance of VAs for the payment of goods and services may be at the discretion of willing merchants where merchants and buyers are in agreement,” said Zemburuka.
He described this type of agreement as similar to “bartering” where goods or services are exchanged for other goods or services.
Zemburuka said the BoN had adopted the Financial Action Task Force (FATF) definition which describes cryptocurrency as “digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes”.
He said the value of unbacked crypto currencies is determined by supply and demand.
“The bank introduced VAs and Virtual Asset Service Providers (Vasps) under its fintech innovation framework through its innovation hub and plans to register Vasps under its Fintech Innovation Framework, and in the long term it will assess the need to amend the applicable laws and regulations diligently in consultation with other relevant authorities such as the Namibia Financial Institutions Supervisory Authority,” Zemburuka said.
VAs are under-regulated, highly unpredictable, and risky, hence, this change in approach should not be interpreted as an endorsement of VAs or Vasps, he said.
“Members of the public who own, utilise and/or trade virtual currencies do so at own risk and any misfortune or losses incurred will have no recourse to the bank”.
He said regulatory concerns relating to VAs and Vasps have primarily been focused on consumer protection, anti-money laundering and terrorist financing, and possible impacts to financial stability.
As a result, the bank decided to revise its regulatory approach from a “wait and see” approach to a balanced/risk-proportionate approach.
“The approach will support the bank’s strategy to better understand new innovation relating to VAs and support the adaption of favourable innovation within the market, while addressing the risks in order to protect the reputational integrity and value of the financial system,” he said.
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