- As per Act,non-compliant virtual asset service providers could face penalties of up to $671,000 and a maximum of 10 years in prison.
- To obtain a license, service providers must be incorporated in Namibia and comply with all relevant financial laws and regulations.
Namibia has taken a significant step in the regulation of its virtual asset industry by passing the Namibia Virtual Assets Act 2023 into law. The bill, which aims to supervise and regulate virtual asset service providers and related activities, was officially signed by President Hage Geingob on July 14, and it has now been inserted into the Gazette of the Republic of Namibia, though it is not yet effective.
The main objectives of the new law are to ensure consumer protection, prevent market abuse, and mitigate the risks of money laundering and terrorism financing within the virtual asset sector. The Namibia Virtual Assets Act 2023 is groundbreaking as it marks the country’s first formal approach to the treatment of cryptocurrencies and related activities.
It follows its passage by the National Assembly last month, signaling the government’s commitment to embracing digital financial innovations while maintaining a robust regulatory environment.
Under the provisions of the Act, non-compliant virtual asset service providers could face penalties of up to $671,000 (equivalent to 10 million Namibian dollars) and a maximum of 10 years in prison.
The regulatory authority, empowered by the Act, has been granted the authority to license virtual asset service providers and appoint inspectors to conduct investigations. Additionally, it possesses the power to take enforcement action against license holders who fail to adhere to the stipulated regulations.
The Act introduces different license classifications based on the functions of the firms. These classifications include licenses for initial token offerings, virtual asset broker-dealers, wallet services, custodians, and advisory services. To obtain a license, service providers must be incorporated in Namibia and comply with all relevant financial laws and regulations.
It is worth noting that the Namibian central bank, the Bank of Namibia, maintains its stance that cryptocurrencies will not hold legal tender status in the country. This indicates that the Act aims to regulate virtual assets without granting them the same status as traditional fiat currencies.
However, an interesting provision in the law is the exclusion of central bank digital currencies (CBDCs) or their equivalents from scrutiny. The Act explicitly defines “virtual assets” as not including “digital representations of fiat currencies.” This suggests that the central bank’s exploration of CBDCs, initiated in October 2022, remains unaffected by the Act’s implementation.
Namibia’s journey towards regulating virtual assets has been characterized by a shift in policy over the years. In May 2018, the Bank of Namibia reversed its initial decision to ban cryptocurrency exchanges, leading to the more accommodating regulatory approach evident in the newly enacted Namibia Virtual Assets Act 2023.