Nearly six years after Namibia banned the exchange of virtual currencies, the country has taken a remarkable turn this week by passing a crypto bill that charts a local path for the industry.
After the bill was signed by the president in mid-July and underwent additional procedural steps, Namibia’s Virtual Assets Act of 2023 has now been officially enacted into law.
This legislative development marks a notable shift from Namibia’s previous stance on cryptocurrencies, signifying a significant departure from the country’s long-held position on the matter.
Back in September 2017, Namibia’s central bank published a paper asserting that, according to its interpretation of a 1961 law, establishing virtual currency exchanges or engaging in activities that facilitate the conversion or exchange of virtual currencies was considered illegal.
However, in May 2018, the central bank slightly revised its position, stating that cryptocurrencies “may be used as a payment instrument to pay merchants on the internet for goods and services.” Despite this shift, the bank maintained its stance that setting up cryptocurrency exchanges remained illegal within the country’s regulatory framework.
In 2021, despite its previously softened stance, the central bank made it clear that it would not assist victims of crypto scams.
Fast forward two years, the law that Namibia has now endorsed takes a different approach, emphasizing consumer protection and addressing concerns related to money laundering and terrorism financing risks. This will be achieved through the establishment of a regulatory authority tasked with overseeing virtual asset service providers (VASPs).
The new regulatory framework aims to create a safer and more transparent environment for cryptocurrency-related activities, safeguarding the interests of consumers and ensuring compliance with anti-money laundering and counter-terrorism financing measures.
As per the law, the regulatory authority possesses the authority to grant licenses to Virtual Asset Service Providers (VASPs), designate inspectors for conducting investigations, and initiate enforcement measures against license holders. The concept of VASPs, which oversees financial entities, has been implemented in other regions, including the UAE.
Firms within the crypto space fall under various license classifications based on their specific functions. These classifications include licenses for Initial Token Offerings, Virtual Asset Broker-Dealers, Wallet Services, Custodians, and Advisory Services.
Each license category corresponds to the distinct roles and responsibilities within the cryptocurrency ecosystem, ensuring a comprehensive regulatory framework for different entities operating in the virtual asset industry.
Buy Crypto NowIn addition to obtaining a license, it is a requirement for license holders to be incorporated in Namibia and adhere to additional financial laws and regulations.
Another significant provision within the law appears to exempt central bank digital currencies (CBDCs) or similar equivalents from scrutiny. The law specifies that “virtual assets” do not encompass “digital representations of fiat currencies.”
As of October 2022, the Bank of Namibia is actively researching CBDCs, as reported by the Atlantic Council’s tracker, indicating the country’s ongoing exploration and interest in the potential of central bank digital currencies.
