Namibia's Central Bank Emphasizes That Bitcoin And Other Cryptocurrencies Are Illegal

Namibia’s central bank, Bank of Namibia, has has emphasized that Bitcoin and other cryptocurrencies are not legal in the country. Bank of Namibia made the statement through the release of its September 2017, "Position on Distributed Ledger Technologies and Virtual Currencies in Namibia" report.

As a result, no one in Namibia is allowed to accept Bitcoin, and other cryptocurrencies, as payment for goods and services.

Position on Distributed Ledger Technologies and Virtual Currencies in Namibia
Download: Position on Distributed Ledger Technologies and Virtual Currencies in Namibia.

"The creation and issuance of currency in a sovereign state is widely considered to be the role of a central authority i.e. central bank or central government. To this effect, central banks / reserve banks are normally entrusted to fulfil this mandate by issuing currency and ensuring that the value of the currency is intact through monetary policy interventions. In this regard, the Bank of Namibia Act (Act 15 of 1997) as amended (the Act) provides the Bank with the sole mandate to serve as the state’s instrument to control money supply and to
create and issue currency. Section 17 (Monetary units and symbols) of the Bank of Namibia Act states: 'The President may by proclamation in the Gazette determine the monetary units and the symbols to be used for such units which shall, with effect from the date specified in such proclamation, be the currency of Namibia'," states the position paper by the Bank of Namibia.

The Bank of Namibia also cited money laundering and finacing of terrorism among the reasons it had to clarify that virtual currencies are illegal in the country. They are not the first Afrikan country to make similar claims and highlight that virtual currencies are illegal. The Central Bank of Nigeria, during January of 2017, issued a circular to the country's financial institutions warning them on the use of virtual currencies such as Bitcoin, stating that the move was made necessary by the potential money laundering and terrorism financing risks that have often been associated with virtual currencies. Effectively, the Central Bank banned banks and financial institutions in Nigeria from transacting in virtual currencies. In 2016, the Central Bank of Kenya also issued a similar notice warning the public against the use of virtual currencies such as Bitcoin.

Position on Distributed Ledger Technologies and Virtual Currencies in Namibia
The Financial Action Task Force (FATF) published a report in June 2014 on Virtual Currencies: Key Definitions and Potential AML/CFT Risks | Position on Distributed Ledger Technologies and Virtual Currencies in Namibia

The bank in its position paper also makes a distinction between electronic money and virtual currencies. It states that electronic money is a digital representation of legal tender currency.

"In its digital form, e-money still carries its original value equivalent to that of its legal tender currency. Another notable distinction is that the supply of e-money depends on the fiat money in circulation, which is controlled by the central bank, whilst the supply of virtual currencies solely depends on the issuer’s decision or the community that uses or controls the specific virtual currency,".

Added to that, Bank of Namibia states that it does not recognize virtual currencies as foreign currency that can be exchanged for local currency.

"This is because virtual currencies are neither issued nor guaranteed by a central bank nor backed by any commodity," it explains.

There is however a grey area where the bank seems uncertain, it relates to the use of cryptocurrencies in facilitating remittances.

"The Bank however understands that virtual currencies, when exchanged for legal tender / fiat currency can be used to facilitate payment transactions, remittances and many other financial services. However, due to the lack of a legal premise, the Bank is unable to endorse such activities in Namibia at the moment,"

This is an interesting development considering that just recently in September 2017, a large South African retailer was testing accepting bitcoin payments. The Bank of Namibia, however, has made its stance very clear.

"Like the Namibia Dollar or the South African Rand, virtual currencies cannot be used to pay for goods and services in Namibia. For example, a local shop is not allowed to price or accept virtual currencies in exchange for goods and services,".

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