BITCOIN TRADING BAN – BANK OF NAMIBIA BANNED BITCOINS
In view of the fact that Bitcoin Trading is spreading and gaining recognition all over the world, it is pertinent to know the reasons why some countries rejected its approval as a legitimate currency in their transactions. In this case, Namibia banned bitcoins. Bitcoin Trading has been banned by Central Banks of several countries. One of these countries is Namibia. This write-up presents the various reasons for the ban of Bitcoin Trading by the Bank of Namibia.
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Namibia is situated in South-Western coast of Africa. It gained independence in the year 1990 from South Africa after almost 25 years of agitating for it. Namibia was also colonized by Germany in the time past. Although it has gained independence, Namibia is still financially dependent to the central banking system of her colonizers. The ban of Bitcoin trading is not unconnected to this fact.
Bank of Namibia
Namibia’s Central Bank is known as the Bank of Namibia. It was established in the same year of its independence i.e. 1990, by the Bank of Namibia Act 1990. This establishment is contained in the Namibian Constitution (Article 128). Bank of Namibia is the only financial institution which has the permit to issue the Namibian dollar. This bank oversees the country’s monetary flow.
Bitcoin Trading in Namibia
Bitcoin is one of the few digital currencies gaining attention around the globe. It is used as a legal tender in online transactions and even offline business transactions. It is not controlled by any financial body and country of the world. It is decentralized. Bitcoin trading involves the use of Bitcoin as a medium of payment in transactions. Contrary to its acceptance by many countries of the world, the Bank of Namibia has failed to recognize Bitcoin and other cryptocurrencies as a medium of exchange in its country. In lieu of this, the various reasons for Bitcoin trading ban in Namibia will be outlined in this piece.
Reasons for Bitcoin Trading Ban by the Bank of Namibia
The following are the reasons stated by the Bank of Namibia for its ban of Bitcoin Trading:
Namibia’s Control Act of 1996
The Bank of Namibia banned Bitcoin and other cryptocurrencies trading in the country based on a decades-old act, the Namibia’s Exchange Control Act of 1996 which disallows exchange of digital currencies in the country. It releases a position paper stating its position on digital currencies trading. This latest position by the Bank of Namibia was released in Mid-September 2017.
Absence of Legal Backing
The Bank of Namibia regarded any form of cryptocurrency trading in the country as illegal. It warns Namibians that they have no legal backing if they engage in Bitcoin trading and considered it risky.
Bitcoin is not recognized as a foreign currency which can be exchanged for the Namibian Dollar. The Bank of Namibia claimed that not only were digital currencies not backed by financial institutions i.e. central banks, but also they do not have the backing of any commodity. This is because they are not controlled by any entity. The Bank of Namibia posits in its nine- page position paper that:
“In addition to the bank not recognizing virtual currencies as legal tender in Namibia, it also does not recognize it to be a foreign currency that can be exchanged for local currency. This is because virtual currencies are neither issued nor guaranteed by a Central bank nor backed by any commodity”.
IMF and FATF Anti- Money Laundering Research
The Bank of Namibia backed its position with the Financial Action Task Force (FATF) and the International Monetary Fund (IMF) research. Both organizations wage war against act of money laundering in the world. It was claimed that Bitcoin trading has money laundering tendency. The Bank also supports its claims by the domestic laws of the country.
The ban of Bitcoin trading by the Bank of Namibia can also be related to Bitcoin’s decentralization. It does not require third parties like banks for its transactions. The Blockchain Technology which Bitcoin trading encourages has the potential of eliminating central banks from the financial scene in the nearest future. Thus, the Bank of Namibia may be claimed to be having this fear of getting out of market.
The Bank also prohibited the use of digital currencies for casual transaction i.e. offline buying and selling of goods and services. It cautions its citizens not to accept Bitcoins as a legal tender for any kind of transaction as it cannot be converted to the Namibian Dollar. This position is related to the Central Bank of Kenya’s statement about the use of digital currencies in Kenya in 2015.
According to the position paper:
“A local shop is not allowed to price or accept virtual currencies in exchange for goods and services. Users of virtual currencies should therefore exercise caution when dealing in this type of currencies or when comparing it to e-money.”
Conclusively, while Bitcoin Trading is recognized in other African countries like Nigeria, South Africa, Ghana etc. which makes them pioneers of cryptocurrency; In Namibia, it is highly prohibited based on the reasons discussed above.