BoN ponders legislation review to accommodate digital currencies

The Bank of Namibia has announced plans to review its legislative framework to create a suitable environment for the Central Bank’s Digital Currencies (CBDCs) and Virtual Assets. 

This comes as several countries like the United States, the United Kingdom and South Africa, among others, are already working on plans to herd the public into digital currency controlled by Central Banks. 

BoN Governor Johannes !Gawaxab said the relevant prudential regulators are working on regulating virtual assets and developing a framework for virtual assets and virtual asset service providers. He added that the BoN and NAMFISA have formed a technical committee to develop a prudential licensing and regulatory framework for Virtual Assets (Vas) and Virtual Asset Service Providers (VASPs). 

“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,” he said. 

The Governor noted that in the face of a rapidly changing digitally transformed world, financial systems are also changing, and cited the Covid-19 pandemic as an example of how the payment landscape has undergone a disruptive transformation as digital payment channels have proliferated. 

“People are paying digitally rather than with cash. E-commerce does not accept cash, and many physical stores prefer cashless payments. This digital money trend is convenient and opens a plethora of new opportunities, particularly for financial inclusion and innovation. Is this, however, a rosy picture? Is there anything on the horizon that should worry us? Are we exaggerating the advantages of these innovations while ignoring the risks?” he said. 

According to BoN, in light of such strategic foresight and the rapid digitalisation of the financial system, it has considered whether a potential CBDC could play a role in the future digital payment landscape, as well as its potential properties, costs, and benefits. 

 The Governor asserts that new business models are created on a daily basis, recent technological advances continue to change the landscape, and new operating models emerge in almost every sector, all thanks to digital transformation. 

As a result, he believes that some of these technologies hold great promise for improving financial inclusion, reducing transactional costs and frictions, increasing competition, facilitating faster trade, and making it easier for more people to participate in the financial system. 

However, he reiterated the Bank’s position that Initial Coin Offerings (ICOs) expose themselves to the risk 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,” he said. 

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