Big elephant in the room: Virtual assets

Since the introduction of Bitcoin, one of the most popular decentralized virtual assets, in 2009, the market for virtual assets has grown exponentially, owing to increased market liquidity, the expansion of the blockchain ecosystem, and the emergence of stablecoins.

According to the Bank of Namibia governor Johannes !Gawaxab, because of the close relationship between virtual assets and the real economy, the central bank must manage any potential risks to monetary policy and financial stability in a proactive manner.

“We have seen some specific positive user cases of virtual assets. We are well aware, however, that some uses have occurred through the criminal front, such as fraud, theft, money laundering, and terrorism funding. As a result, the Financial Action Task Force (FATF) anti-money laundering/counter-terrorism financing has mandated standards for handling virtual assets. These should be carefully considered and effectively implemented to mitigate threats to financial integrity,” he said.

For this reason, Namibia has agreed to review its legislative framework to pave way for an appropriate framework that is conducive to this sector. The relevant prudential regulators are working to regulate virtual assets and draft a framework for virtual assets and virtual asset service providers. A technical committee has been established between the Bank of Namibia and NAMFISA to develop a prudential licensing and regulatory framework for Virtual Assets (Vas) and Virtual Asset Service Providers (VASPs), !Gaxawab added.

The Committee is charged with developing a prudential licensing and regulatory framework. Until such a time that it is finalised and operationalised, the public remains cautioned to be careful when investing in virtual assets, as there is no protection should funds so invested be forfeited.

“However, through our newly established Innovation Hub, we have made significant progress proactively meeting this small but growing sector. The Hub recently conducted a survey to engage FinTech players and better understand the landscape of Virtual Assets and Virtual Asset Service Providers in Namibia.”

Fintech

“We are pleased to report that the discussions between the service providers and the Hub were fruitful and gave us a better understanding of their operations. To continue forging this relationship, the Bank is prepared to bring Virtual Assets and Virtual Asset Service Providers under its Fintech Framework in place since last year in a phased and structured manner for increased dialogue and to assess potential risks through its Innovation Hub. The precise plan is that the Bank will, in the short term, register Virtual Asset Service Providers (VASPs) and, in the long term, as mentioned, amend applicable laws and regulations diligently in consultation with other relevant authorities such as NAMFISA,” he said.

“As an outcome of these engagements, we are updating the position paper on Virtual Assets and Virtual Asset Service Providers. While Virtual Assets in Namibia remain without legal tender status, the acceptance of virtual assets for the payment of goods and services will be at the discretion of any merchant and buyer willing to participate in such an exchange or trade. Our position remains that Initial Coin Offerings (ICOs) leave themselves up to the possibility of fraud, manipulation, and misrepresentation. As a result, the Bank does not advocate nor support the general public’s engagement in initial coin offerings (ICOs) related to virtual assets,” !Gawaxab said.