Reserve Bank speaks on Cryptocurrencies: ‘They are not legal tender in Malawi’

The Reserve Bank of Malawi (RBM) has said cryptocurrencies are not legal tender in Malawi and should not be used for the discharge of any obligations that suggests they are a perfect substitute to the Malawi Kwacha.

The cryptocurrency

In a statement released on Monday, Governor of RBM Dr. Dalitso Kabambe said the Central Bank has noted with concern increased public interest in cryptocurrencies, also known as virtual or digital currencies, as observed through the growing number of enquiries on the subject received from the general public and other stakeholders.

He said activities on cryptocurrencies trade in the country have also been reported in the public and other social media platforms.

Examples of cryptocurrencies are Bitcoin (globally, the most widely-known and traded), Litecoin, Ethereum, Zcash, Dach, Ripple, among numerous other forms.

Reserve Bank of Malawi wishes to advise the general public that cryptocurrencies are not legal tender in Malawi. The RBM is however aware that they are used as a means of payment or medium of exchange, a store of value or invested assets online,” said Kabambe.

The Governor said neither the Central Bank nor any other public institution in Malawi has oversight responsibility over cryptocurrency trade, systems or their intermediaries.

Consequently, Kabambe said, the general public and business entities should be aware that any and all activities related to the buying, trading or usage of cryptocurrencies are performed at own individual risk, as there are no legal consumer recourse channels available at the moment.

RBM bears the exclusive mandate to issue legal tender, thus, bank notes and coins in Malawi, and to date, has not issued any form of cryptocurrency. The general public is encouraged to fully understand and be aware of the risks associated with the use of cryptocurrencies and similar online trading schemes, which includemoney laundering, vulnerability to cybercrimes, hacking and other fraudulent activities.

Other potential risks to users would emanate from loss or theft through a security breach, user error or a technological failure. RBM urges any individual or entities currently investing or intending to invest in cryptocurrencies and related products/assets to exercise restraint or caution due to the aforementioned risks and unregulated status of such online schemes.

Users risk losing their money since no regulatory protection exists that would compensate them should the cryptocurrency scheme fail,” said Kabambe.

Kabambe explained further that the online and borderless nature of cryptocurrencies mean that most of the trading is conducted via systems and platforms that are based outside Malawi.

By their design, the Governor explained, there is anonymity of the virtual account holders as physical identities of persons behind any of the transactions are not recorded.

So far, there is no cryptocurrency exchange known to have been registered in Malawi, notwithstanding any trading by its citizenry or local entities on the foreign-based exchanges. These factors present another risk dimension as it would make it particularly difficult to pursue perpetrators in the event of fraud or other forms of malpractices that may be encountered by users in Malawi,” said Kabambe.

He also warned that RBM will not approve nor recognise any inbound or outbound foreign investment in cryptocurrencies.

Kabambe also advised current and potential users to observe extreme caution when dealing with self-proclaimed cryptocurrency educators, trainers, advisors, entrepreneurs and firms as the credibility and validity of their claims is not certain.

Members of the public should therefore guard against being exploited by ambiguous and unscrupulous schemes, and are further urged to deal with financial service providers licensed by the RBM, which is the sole regulatory authority for financial services in Malawi,” advised Kabambe.

Kabambe emphasised that the Central Bank is against trading in cryptocurrenciesand any related activities rather than the technology behind it.

The RBM wishes to acknowledge that it is aware that the underlying cryptocurrency concept is Blockchain Technology, which has proved to be so versatile that it has found beneficial application in various other areas of commercial activity in the business world.

The RBM wishes to assure the general public that it will continue to monitor domestic, regional and global developments regarding the subject matter and reserves the right to review its position regarding any regulatory intervention it may feel necessary to apply,” explained Kabambe.

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