The recently witnessed plunge in the prices of cryptocurrencies has strengthened the Bank of Namibia’s stance against digital currencies and it has said people’s interest in them is fueled by challenging economic conditions and a lack of understanding by members of the public.
“Overall, market analysis has shown that cryptocurrencies have been less effective than fiat currency at maintaining a relatively stable value to goods and services,” says the bank.
Fiat money is an intrinsically worthless object, such as paper money, that is deemed to be money by law.
The bank maintains that internet money is risky and can be used in criminal activity such as fraud, money laundering and pyramid schemes due to their unregulated and anonymous / secretive nature.
It has said that it is against the use of the money a store of value by members of public given their volatility.
“The Bank does not currently recognise cryptocurrencies as a commodity nor support the trading of cryptocurrencies on any (domestic or international) financial market or currency exchange. The Bank therefore strongly advices the public to refrain from the trading and owning cryptocurrencies on international financial markets and cryptocurrency exchanges,” it said.
While there are various platforms that convert the currencies into authorised money, the bank said these are not subject to supervision which applies to regulated exchanges and as such “may lack critical system safeguards and customer protection procedures, which may lead to people losing some or all of their money”.
Said the bank, “The Currency and Exchanges Act 9 of 1933 read in conjunction with the Exchange Control Regulations 1961 does not make provision for the establishment of cryptocurrencies exchanges or bureaus in Namibia. Thus any cryptocurrency exchanges established and operational in Namibia are illegal.”
“The use of unregulated cryptocurrencies may increase liquidity and credit risks within the financial system in the event a counterparty or institution does not hold sufficient cryptocurrency (virtual currency units) to settle an outstanding obligation. In addition, cryptocurrencies cannot be easily sold or exchanged for cash without a substantial loss in value and the absence of a guaranteed settlement procedure exposes users to substantial credit and liquidity risk,” it said.
While Namibia so far continue shutting doors against cryptocurrencies, other countries have swallowed the risk and thrust them into the mainstream economy.
Malt for example is positioning itself to be a hub of cryptocurrency operations and is “writing rules that should give exchange owners and users certainty about the future.”