The South African nation in July passed the Virtual Assets Act into law, which requires a regulator to oversee the crypto sector, and includes licensing requirements for service providers like exchanges. But Namibia has a long way to go to catch up with countries around the world – including its neighbor South Africa – in setting up comprehensive laws and rules for the sector.
The act is exciting and timely but only a “skeleton” of what the crypto space needs, Ronald Nanub, economist at the Office of the Prime Minister in Namibia, said in an interview with CoinDesk.
For one, the act requires a regulator to oversee the sector, but a watchdog has yet to be chosen. Although the regime is trying to bring virtual asset providers “to the same standards that you would have on exchange controls and financial institutions,” the lack of clarity on how a chosen regulator might treat crypto could stop companies from setting up in Namibia, said Diana Vivo, associate at law firm DLA Piper Africa (ESI) Namibia.
The Virtual Assets Act is a dramatic turnaround from the Namibian central bank’s previous stance that crypto exchanges were illegal in the country. The bank said in 2017 that there were no legal provisions for exchanges to operate.
The new law changes that as it subjects crypto firms to the Financial Intelligence Act’s anti-financial crime provisions and the Companies Act. Firms must be incorporated in Namibia and have a registered office in the country in order to get a license. If a crypto firm operates in the country without a license, it could face up to 10 years of imprisonment or pay a penalty of 10,000,000 Namibian dollars ($671,572).
The new law also sets requirements for consumer protection, preventing market abuse and money laundering. But the act is only the first step to setting up a comprehensive regulatory strategy, according to Nanub.
Next steps
Namibia needs a crypto tax framework that is “fit for purpose,” according to Nanub, because the country doesn’t tax digital assets, even for capital gains. Another commission or compliance body could also be created to ensure people follow rules, he added.
Under the new law, the chosen crypto regulator will have powers to license virtual asset service providers and make new rules. However, the bill “doesn't give obligations to the regulatory authority, the structure, the level of expertise that it needs to have, it's still very open,” Vivo said, explaining some areas that could be addressed in future legislative efforts.
Flexibility is good but “we do not want to see those powers being taken beyond proper limits,” Jamie Theron, senior associate of DLA Piper Africa (ESI) Namibia said.
A regulatory framework on how banks should treat fintech and a central bank position paper on crypto regulation – which states merchants should be allowed to accept crypto as payment if they wish – hint at how the country may go on to regulate the sector.
The new law will come into effect on a date determined by Namibia’s finance minister, Vivo said.
