The Bank of Botswana stresses the necessity of responding to threats that cryptocurrencies could bring with specialized legislation. Although the local crypto market is not yet well developed, the recent Financial Stability Report of the central bank states that local authorities have to start building relevant regulatory structures to address the threats that are already beginning to appear.
While the domestic virtual asset market now represents ‘minimal’ risks to financial stability, the Bank of Botswana’s report said the rapid evolution of financial technologies and wider global integration of crypto markets may increase systemic risks. Cascading failures between financial institutions (systemic risks) can create sweeping, severe economic instability.
Bank Highlights Crypto Risks, Stresses Need For Oversight
The bank said risks associated with crypto assets are low domestically, but remaining misconduct raises regulatory concerns. It stressed that customary rules of effective oversight will become even more important as technology adoption takes off.
However, it did highlight the anonymity associated with digital platforms, which the report believes facilitates money laundering and terrorist financing. The report noted that this area was one of the financial sector’s top five national security risks.
Focusing on digital platforms and payment instruments that facilitate anonymous transactions, the bank noted that the “evolution of digital platforms and digital payment instruments to enable transaction anonymity presents an opportunity for money laundering in the financial sector.”
However, the risks from these are combated through the recommendation of those at the Bank of Botswana, namely the implementation of Anti Money laundering (AML) and Counter Financing of Terrorism (CFT) regulations for virtual asset service providers (VASPs) such as crypto exchanges.
Why #Crypto needs regulation #memecoin #hawktuah pic.twitter.com/Xvos4guTKj
— Evan Kirstel #B2B #TechFluencer (@EvanKirstel) December 22, 2024
Along with urging increased market surveillance and greater cooperation with law enforcement authorities to catch and stop unlawful activities, the bank has also raised the issue of stronger action to prevent legal black markets from unfairly undermining the informal sector.
This comes when the rest of the world adopts a similar trend of setting up crypto regulations for the cryptocurrency industry.
Two exchanges faced compliance breaches. They were recently forced to extend the timeline for the mandate of AML registration for VASPs by five months to November 30, 2024, when Taiwan did so.
Next year, the United Kingdom will implement a comprehensive regulatory framework to unify rules for stablecoins and staking services under a single regime. If billionaire businessman Donald Trump becomes President-elect, one area that could see a more lenient regulatory stance is cryptocurrency enforcement in the United States.t
Chested for future risks, Botswana’s central bank has asked for a robust regulatory framework for the crypto sector. Although the local market is in its infancy, the bank’s proactive stance on new financial innovation and international integration suggests that the bank could become ready for its challenges.
The central bank’s actions reflect a growing consensus among regulators worldwide: As cryptocurrency adoption grows, the tools to contain financial stability, stem illicit activities, and inhibit national security will have to be expanded.
