ADAPTATION OF CRYPTO-CURRENCY IN TANZANIA

Published by Tawajud Lwenduru.

Crypto currency is a form of payment that can be exchanged online for goods and services. Crypto-currencies use a technology called block-chain which is a decentralized technology spread across many computers that manage and record financial transactions. Part of the appeal of this technology is the security it provides to assets and the untraceable power by the issuing bank, the government or any related third party. Examples of crypto currencies include Bitcoin, Litecoin, Ethereum, Dogecoin, Dash to mention a few.

 

On June 13th, 2021, The Honourable President of the United Republic of Tanzania, Honourable Samia Suluhu Hassan announced the country’s support for crypto currency, directing the nation’s financial institutions to prepare for the widespread use of digital assets. The announcement has boosted bitcoin’s prices, a boost also observed after El Salvador decided to make cryptocurrency money legal and Elon Musk’s plan for Tesla to resume accepting Bitcoin as a payment form.

 

The Honourable President Further urged the Tanzanian Central Bank to start active operations to facilitate cryptocurrency use in the country – although many people in the East African nation have not yet adopted digital assets. Tanzania's Central Bank has said it is working on the President’s directive to prepare for cryptocurrencies, pointing to a possible reversal of a ban the bank put in place in 2019. The ban on Crypto-Currency lies in its minimal regulation, with no requirement for investors and traders to hold a license or certificate proving their identities and trading history. Critics have argued that the ban by the central bank of Tanzania is unreasonable and lacks legal backing from neither Acts nor Legislations (the BoT nor the Foreign Exchange Act).

 

Some argue crypto-currency is more of a property rather than a proxy for legal tender, they go further to argue that a crypto-currency transaction is essentially an electronically facilitated exchange of property for property – a form of barter.

However, under the purview of section 15 of the National Payments System Act No. 4 of 2015 (the NPS). Section 15 of the NPS provides that “a person shall not issue an electronic payment system without a license or approval from BoT”. Hence the banning of Crypto currency would base on this section. Some of the dangers that follow this type of trading and some of the concerns are:

ü  There are a lot of complications as it will be hard to protect one’s interest due to the fluctuation that come with Crypto currency. As it is easily influenced, i.e. Famous people like Elon Musk.

ü  Transactions in virtual currencies such as bitcoin are largely untraceable and anonymous making them susceptible to abuse by criminals in money laundering, Scamming, and financing of terrorism.

ü  How shall the taxes be paid in digital tax if the country is going to legalize is a mode of payment.

ü  Inadequate Regulating Authorities. Consumers may therefore lose their money without having any legal redress in the event these exchanges collapse or close business.

Altogether due to the rapid technological advancements taking place across the world, it may be more beneficial to the Tanzanian economy to find means to regulate the use of Crypto Currency.

Few countries have started implementing laws concerning Crypto Currency, in the United Kingdom a new Anti- Money Laundering Regulation called, The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 came into effect on the 10th of January 2020 with an inclusion of the crypto-asset sector considered as a regulated entity which is now subject to Anti-Money Laundering Rules and Legislation.

The proposed adaptation of cryptocurrency in the United Republic of Tanzania is a welcome gesture considering the adaptation of technology worldwide and the move towards a global digital economy. However, it should also be noted that digital assets are still a sensitive and widely debated topic due to the way they assets are structured, the lacuna in law governing the sector and the large number of stakeholders involved and thus it is important to ensure that as the country moves for the digitalization of the economy, the law is also modified to include such assets and legislation is set on how the same can be protected and how violators can be penalized under the law.