Botswana central bank pushes for crypto oversight despite limited risks

The central bank of the South African nation of Botswana says cryptocurrencies pose limited risks to its economic stability but has advocated for measures to regulate the sector.

According to the Bank of Botswana, the domestic virtual asset market remains small and relatively unsophisticated and, hence, doesn’t pose an immediate threat to the nation’s financial well-being.

However, the rapid evolution of global crypto markets and the increasing integration of the crypto sector with traditional financial systems could introduce systemic risks over time. 

In its latest Financial Stability Report, the central bank warned that these risks, if left unchecked, might cascade into broader economic vulnerabilities.

Despite the current limited exposure, the central bank stressed the importance of preemptive action, calling for tailored oversight frameworks that address market misconduct alongside other risks such as money laundering and terrorist financing fuelled by anonymous crypto transactions. It noted:

Domestically, risks emanating from crypto assets are minimal, but ongoing misconduct in the segment presents regulatory concerns. Regulators, therefore, need to develop effective oversight frameworks for the sector.

Money laundering using digital payment channels was flagged as a major concern for Bostwanan, with the central bank warning that the anonymity offered by certain digital platforms creates fertile ground for illicit financial flows. 

These channels, the bank noted, enable funds to be moved across borders with “relatively low detection risks,” complicating efforts to trace and intercept suspicious transactions. 

To mitigate such activities, the central bank urged the creation of clear rules to improve market monitoring and strengthen cooperation between financial regulators and law enforcement agencies.

Further, it also wants regulators to ensure that Virtual Asset Service Providers are fully compliant with Anti-Money Laundering and Counter-Terrorist Financing regulations.

Cryptocurrencies and money laundering

Cryptocurrencies, due to their pseudonymous nature and decentralised structure, have long been criticised for their role in facilitating money laundering, fraud, and other illicit activities. 

This has led to increased enforcement actions, the introduction of stricter regulatory measures, and the updating of existing laws to better address the evolving risks posed by digital assets.

While the Central Bank of Botswana acknowledged these risks, its assessment was notably more measured compared to the urgent warnings and stricter stances often seen across other jurisdictions.

For instance, in September, law enforcement in Sweden labelled some cryptocurrency exchanges as “professional money launderers” for allowing illicit transactions after initiating an investigation into unlicensed platforms.

The country’s Financial Market Supervisory Authority had previously sounded the alarm on the rising misuse of digital assets, particularly stablecoins, in fueling cyberattacks, illegal dark web transactions, and sanctions evasion tied to geopolitical conflicts.

Last month, the Eurasian Group on Combating Money Laundering issued a similar warning, highlighting that bad actors were increasingly taking the crypto path to obscure financial trails and launder illicit funds using fake identities and multi-layered transactions across several platforms.

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