Botswana’s central bank emphasizes the need for cryptocurrency regulation, despite identifying minimal risks in the current market.
Botswana’s central bank accepts minor cryptocurrency threats, but emphasizes money laundering and regulatory problems as top considerations.
Botswana’s central bank stated that the country’s domestic crypto markets remain underdeveloped, posing “minimal” dangers to financial stability. However, the bank stated that restrictions should be implemented to mitigate possible digital asset hazards in the future.
According to the central bank’s Financial Stability Report, the crypto market’s growing interconnection with the financial system may pose systemic concerns.
In financial terms, a systemic risk is a cascade failure induced by linkages within the financial system. The subsequent domino effect might cause an economic slump.
Crypto poses minimal risks to Botswana’s financial stability
Despite this, the bank stated that the dangers associated with cryptocurrency are modest in its local markets. However, the central bank stated that authorities should build supervisory mechanisms to help the industry prepare for potential risks. The Bank of Botswana wrote:
“Domestically, the dangers associated with cryptocurrency assets are minor, but increasing wrongdoing in the segment raises regulatory worries. Regulators must consequently create adequate supervision structures for the industry.
The bank also stated that the local virtual asset markets are still emerging. Because it is “relatively unsophisticated,” the bank believes it offers few financial stability concerns.
The central bank also stated that dangers from financial technology in general are negligible. They may, however, grow when new technological advancements enter local markets.
Botswana lists money laundering as a top security risk
While cryptocurrency does not endanger financial stability, the Bank of Botswana has identified the use of digital payment instruments for money laundering and terrorist funding as one of the five most serious national security concerns emanating from the financial sector. The Central Bank wrote:
“The evolution of digital platforms and digital payment instruments that promote anonymity of transactions present an opportunity for money laundering in the financial sector.”
The bank stated that the sophistication of financial technology advancements enables illegal monies to be transferred internationally with low detection risks.
To avoid these risks, the central bank encouraged authorities to guarantee that virtual asset service providers, such as cryptocurrency exchanges, comply with anti-money laundering, counter-terrorism financing, and counter-regulations.
The bank also stated that market surveillance and regular engagement with law enforcement may aid in the detection of unlawful activities.
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