Financial Crime World

Namibia’s New Crypto Law Sparks Hope for Regulation Amidst Financial Crime Fears

The Virtual Assets Act has been passed in Namibia, marking a crucial step towards regulating the country’s cryptocurrency sector. The law requires licensing for firms and mandates the appointment of a regulator to oversee the sector, setting the groundwork for future legislation.

Uncertainty Remains

However, experts say that the lack of clarity on how the chosen regulator will treat crypto could deter companies from setting up in Namibia. “The regime is trying to bring virtual asset providers to the same standards that you would have on exchange controls and financial institutions,” said Diana Vivo, associate at law firm DLA Piper Africa (ESI) Namibia.

A Significant Turnaround

The new law marks a significant turnaround from the Namibian central bank’s previous stance that crypto exchanges were illegal in the country. The bank had stated in 2017 that there were no legal provisions for exchanges to operate, but the Virtual Assets Act subjects crypto firms to anti-financial crime provisions and company laws.

Key Requirements

Under the new law, firms must:

  • Be incorporated in Namibia
  • Have a registered office in the country to obtain a license
  • Failure to comply could result in imprisonment or penalties of up to 10 years or N$10 million ($671,572)

The law also sets requirements for consumer protection, preventing market abuse and money laundering.

Next Steps

Namibia needs a crypto tax framework that is “fit for purpose,” according to economist Ronald Nanub from the Office of the Prime Minister. The country does not currently tax digital assets, even for capital gains.

  • The chosen crypto regulator will have powers to license virtual asset service providers and make new rules under the law.
  • Some areas still require clarification, such as the level of expertise required for the regulatory authority.
  • A regulatory framework on how banks should treat fintech and a central bank position paper on crypto regulation hint at how Namibia may go on to regulate the sector in future legislative efforts.

Implementation

The new law is set to come into effect on a date determined by Namibia’s finance minister. Experts are hopeful that the law will pave the way for more comprehensive laws and rules, but caution that flexibility must be balanced with proper limits to prevent abuse.