A McKinsey report earlier this month highlights that although cash is still king in Africa its supremacy is likely to be increasingly challenged as e-payments gain momentum.
With innovation escalating there is a shift in the way people pay for goods and services with electronic payments rapidly displacing cash and cryptocurrency and digital currencies emerging as alternatives to traditional concepts of money, it says.
Speaking of digital currencies, the central banks of the majority of the countries of the LEX Africa members that participated in this practice-focused article on banking and finance reportedly had a negative view of cryptocurrencies. Their comments ranged from cryptocurrencies being ‘not legal tender’ or ‘not recognised’, to their use being ‘openly discouraged’, to the view that they were ‘contrary to the exchange regulations’ of the country.
Of the central banks that were reportedly positive towards cryptocurrency, two of them were looking at the possibility of introducing their own coins, in one case “to minimize the country’s concern about anonymity, stability and regulation”.
In 2018, the National Bank of Rwanda (NBR) regarded cryptocurrency as forbidden. “Anyone who gets involved in the business of buying and selling digital money will do so at their own risk,” the Governor of the National Bank of Rwanda said while presenting his Monetary Policy and Financial Stability statement.
Rwanda has not enacted regulations or legislation specifically regulating digital currency yet, says Jean Maurice Mugabonabandi, partner at Certa Law, Kigali. To do so, would require new financial policies, structures and passing of a presidential order.
However, he says the National Bank of Rwanda (NBR) has been conducting studies on possibly developing its own digital currency, Rwandacoin, to “minimize the country’s concern about anonymity, stability and regulation”.
The country’s payment system is regulated by the central bank. “Only an individual or institution which has been licensed by the National Bank of Rwanda can provide payment services within the Rwandan jurisdiction,” says Mugabonabandi.
Rwanda has continuously pursued efforts to equip the public with fintech services. And the government’s commitments include shifting to a cashless economy through encouraging the use of mobile money transactions and enabling access to and payment for government services, he says.
It has also implemented measures to ensure that the fintech industry is accessible to all consumers across the country and ensure services are made available in English, French and Kinyarwanda – the native Rwandan language. It is also incentivising internet service providers to provide affordable services, and free internet is provided in areas such as car free zones, public bus stops and in public transport vehicles.
Among other legislation, over the last three years Rwanda has enacted three laws on money laundering, says Mugabonabandi. “This includes laws relating to the prevention and punishment of money laundering financing of terrorism and weapons of mass destruction.” Regulations determining administrative sanctions on financial institutions failing to comply with the laws have also been enacted, he says.
Rwanda has also enacted a law on the prevention and punishment of cybercrimes and a law on protection of personal data and privacy.
The Central Bank of Egypt (CBE) is moving forward to adopt cryptocurrency laws that will be regulated by the CBE, according to Heba Hegazi, senior associate at Marghany Advocates in Cairo.
He says the CBE didn’t issue any “rules or procedures regarding the license that needs to be obtained in order to pursue cryptocurrency activities in Egypt.” However, the CBE is looking into issuing a digital currency version of the Egyptian pound.
Hegazi says the CBE has also issued legislation to unleash a surge in new fintech investments and change the way the country’s largely unbanked citizens do business. In February this year, a law was also issued granting Egypt’s Financial Regulatory Authority (FRA) the power to regulate the use of financial technology and foster the switch to a cashless society.
The CBE recently published regulations governing the technical payment aggregators and payment facilitators, to cope with rapid developments in collection, bill payments and the payment for services and give merchants and companies access to financial and technical services and e-payments, he says.
Egypt introduced an anti-money laundering law in 2002, which has been amended several times since then.
In addition, the Anti-Cyber and Information Technology Crimes Law of 2018 regulates the use of cyber technology and the circulation of data through different networks.
Afrique du Sud
In July 2022, the deputy governor of the South African Reserve Bank (SARB), Kuben Naidoo, said the SARB intends to regulate crypto assets and/ or cryptocurrencies as financial assets, according to Natalie Scott, Director at Werksmans Attorneys.
In addition, the SARB, noted in its 2021/22 annual report, that it participated in Project Dunbar together with the Reserve Bank of Australia, Central Bank of Malaysia, the Monetary Authority of Singapore and the Bank for International Settlements Innovation Hub to assess the use of CBDCs for cross-border international payment settlements, says Scott.
“It is unclear when the SARB will undertake further feasibility studies and whether these studies will result in it issuing a South African CBDC,” she adds
Following confirmation that new regulations on crypto assets will be implemented within 12 to 18 months, the SARB published a guidance note in August to inform banks and controlling companies of the practices and implementation of anti-money laundering measures in respect of crypto assets.
Another key piece of legislation is the Cybercrimes Act No. 19 of 2020, which addresses the risks associated with cybercrimes and requires electronic service providers and financial institutions to report any cybercrime to the police within 72 hours of becoming aware of it.
In January this year, the government announced plans to provide high-speed internet connectivity to all communities in South Africa by 2024 and provide free internet to low-income households.
Historically, banks have been the primary providers of payment services. “However, recent technological advancements have made it possible for non-bank entities, such as fintech companies to provide payment services in South Africa,” says Scott.
The SARB has also launched the Rapid Payments Programme, which will provide a cost-effective instant payment service across banks. This will enable mobile phone users to use instant payment services that are available across various participating banks and retail payment platforms.
It will also enable Meta platforms, such as WhatsApp and Facebook Messenger, to offer payments on their platforms, and facilitate parties to transfer money easily via instant message, says Scott.
Namibia’s central bank, the Bank of Namibia, does not recognise cryptocurrencies as legal tender in the country and is strongly against their use as a method of payment for goods and services, according to Myra Craven, consultant at Koep Attorneys in Windhoek.
The Bank of Namibia is assessing the viability of a central bank digital currency (CBDC) and recently hosted a discussion on CBDCs and virtual assets with representatives from regional and international regulatory authorities.
Craven says she is not aware of any legislative interventions to accommodate fintech services or of any that are in the process of being developed.
The provision of payment services in Namibia is regulated and entities must be authorised in terms of the Payment System Management Act, 2003, she adds.
There have not been any recent statutory developments in relation to anti-money laundering legislation in Namibia, says Craven. “I understand, however, that the Financial Intelligence Centre, which is statutorily mandated to assist with combatting money laundering, financing of terrorism and proliferation, is enforcing the relevant legislation (the Financial Intelligence Act, 2012) very strictly.”
The Namibian government is in the process of finalising a cybercrime bill, “but Namibian citizens will not be adequately protected in the interim as the laws in existence do not deal with such crimes,” she says.
Cryptocurrencies are not legal tender in Zambia. “This remains the Central Bank’s view to date and to the best of our knowledge there are no incoming regulations on cryptocurrencies in Zambia,” says Lupiya Simusokwe, partner at Corpus Legal Practitioners in Lusaka.
The use of any cryptocurrencies is therefore at the user’s own risk.
“Nonetheless, we believe basic contractual rules remain relevant in determining the parties’ contractual rights and obligations,” he says.
The Central Bank’s research on forming a digital currency is expected to be completed sometime in 2023, says Simusokwe.
In addition, the Ministry of Finance recently launched a Financial Sector Development Policy. This will support technology-enabled financial service delivery models, such as online-based financial services, agent banking, mobile financial services, ATM use and point of sale (PoS) facilities.
And the National Financial Switch project seeks to roll out the first-ever local nationwide shared platform, that facilitates interoperability of digital payments throughout the country, He says.
Through the Ministry of Finance, funding is also provided to start-up fintech companies and small and mid-size enterprises (SMEs).
Only an entity which has been designated (equivalent of being licensed) by the Central Bank to do so can provide payment services, says Sankananji Mubanga-Chilufya, associate at Corpus.
“It must be understood that for one to be granted the designation by the Central Bank, they should have a physical presence in Zambia and comply with other fit and proper clearances conducted by the Central Bank.”
The Zambian Prohibition and Prevention of money Laundering Act provides for a broad definition of what money laundering entails. The Central Bank Anti-Money Laundering Directives of 2004 require regulated institutions to develop internal anti-money laundering policies, she says.
The Financial Intelligence Center Amendment Act, recently introduced several amendments to strengthen the main act and widen the powers and functions of the Financial Intelligence Centre (FIC).
Zambia also has a Cyber Security and Cyber Crimes Act, which provides for the criminalisation and protection of persons against cybercrime, says Mubanga-Chilufya.
The Angolan Central Bank has expressed, a positive acceptance and regulation of crypto-assets and/or cryptocurrencies, says Neuza Melao Dias, partner, at FBL Advogados in Luanda. This is evidenced by the efforts of the bank to draft and publish legal instruments to regulate financial operations that include virtual assets, such as cryptocurrencies, stable coins and NFTS.
This decision was influenced by the Financial Action Task Force´s (FATF) recommendations, says Dias. Recognising the irreversibility of the decentralised finance movement and the growing use of virtual assets worldwide, in 2021 it published recommendations on how to mitigate the risks associated with this type of financial service.
“Our jurisdiction enables consumers to access these fintech services, either through downloadable applications or through access to affordable and reliable internet connectivity services that each of the commercial banks makes available for their customers,” says Dias.
In the crypto currency context, “since they have not yet been implemented in Angola, we cannot talk about fintech services for this type of currency. However, we believe that with the acceptance and regulation of cryptocurrency by the Angolan Central Bank, there will be fintech providing services in this area,” she says.
In a banking context, the Angolan Interbank Services Company (EMIS) developed and started implementing in July 2020, a new payment infrastructure, called the Online Payment Gateway (GPO), says Marizeth Francisco, trainee lawyer at FBL.
This is a technological platform established and operated by EMIS, and shared by issuing banks and acquirers participating in the Multicaixa Express system, which ensures new payment methods for merchants with virtual stores on the internet, she says.
Every entity or legal person duly licensed by the Central Bank, may provide these payment services.
In January 2020, Angola enacted the Law for the Prevention and Combat of Money Laundering, the Financing of Terrorism and the Proliferation of Weapons of Mass Destruction, which is currently enforced, and revoked all the previous laws in this category.
Additionally, to combat and criminalise cybercrimes, there are two laws in force in Angola, namely, The Law for the Protection of IT Networks, and Systems and Crimes Against Computer Data, says Francisco.
In Mozambique, the Central Bank has not provided a view on crypto assets in general, but has openly discouraged the use of Bitcoins in the jurisdiction, according to Célia Francisco, partner at CGA in Maputo.
She says that in one of the bank’s statements it said companies transacting with Bitcoin are not regulated under Mozambican law, and the Bitcoin does not offer security and is prone to frauds and other crimes.
On the availability of access to fintech services in the country, she says the public can have access to free internet in ‘digital squares’ of which more than 70 have been installed throughout the country.
Payment services is a regulated activity provided by financial entities dully licenced for that by the Mozambican Central Bank, the regulator of the financial sector, says Francisco.
She says the law of credit and financial institutions was changed late in 2020 to the effect that the companies that provide payment services are divided into the categories of electronic money companies, funds transfer companies, and payment aggregator companies.
Mozambique has a new anti-money laundering law, which includes virtual assets – digital representations of the amount which can be stored, sold or transferred digitally. The activities related to virtual assets are limited to entities with prior authorisation from the Central Bank
She says Mozambique also has a law on electronic transactions, enacted in 2017 to establish sanctions for cybernetic infractions while assuring the protection of the consumers. And in 2019 the parliament ratified the Convention of the African Union on Cyber Security and Personal Data Protection.
The Central Bank of Lesotho (CBL) issued a press statement advising the public that it does not oversee, supervise or regulate cryptocurrencies and that in the event of losses there is no recourse to the CBL, says Pamela Bubb, partner at Webber Newdigate in Maseru.
In addition, she says “The CBL has not expressed a view on CBDCs and we are not aware of the CBL developing its own CBDC.”
She says there are currently a number of fintech services operating in Lesotho, but the access to infrastructure is mainly limited to urban areas.
Payment service providers in Lesotho are required to be licensed by CBL. “There are a number of requirements which must be met in order to qualify for a license, including that the licensee must be a company and have a registered office in Lesotho.”
She says Webber Newdigate is not aware of any amendments to the national payment system that have been made or proposed to enable new market entrants to participate in the transfer of payments and to enhance the current payment system in Lesotho.
On anti-money laundering legislation, Bubb says the Financial Intelligence Unit of the CBL recently published guidelines aimed at implementing financial sanctions against terrorist organisations and persons sanctioned by the United Nations Security Council.
There are no laws currently in place dealing specifically with cybercrime in Lesotho. However, there is a Computer Crime and Cybercrime Bill, “although this is yet to be enacted and no timeline for its promulgation is available,” says Bubb.
Abdourahim Bodeen Diallo, legal adviser at Thiam & Associates says the Central Bank of the Republic of Guinea does not recognize crypto-currencies as legal tender in principle.
He says Guinea is well equipped to allow consumers to access fintech services. This is illustrated by the growing interest of traditional operators (telecom, bank), start-ups and other new players.
Companies holding banking licenses can offer almost any type of financial service, including electronic money distribution, without needing to apply for an additional license from the central bank.
“In practice, access to internet connectivity services is still quite expensive for Guineans. As for reliability, it is strongly questionable, despite the good coverage of the network on the national territory,” says Diallo.
The provision to customers and the management of means of payment by service providers other than credit institutions may be authorised on a limited basis within the framework of regulations established by a decision of the Approval Committee.
The adoption of the law on inclusive finance is an important change that has been made to democratise the current national payment system, allowing new entrants to participate in the transfer of payments by improving the current system.
The central bank has also been encouraging the use of new payment methods with a focus on the social development of less fortunate Guineans.
Guinea has legislation which defines the rules and mechanisms aimed at fighting cybercrime. “It also enables the Republic of Guinea to comply with its community and international commitments in terms of cybersecurity,” says Diallo.
He says the fight against money laundering and terrorist financing is a huge challenge, because it exists in all sectors of economic and financial activities. It is within this framework that the Guinean legislator has recently adopted a new law on money laundering and terrorist financing, he says.
Further to the official notice issued by the Bank of Tanzania in 2019, crypto-assets and/ or cryptocurrencies are “contrary to the existing foreign exchange regulations,” says Jasbir Kaur Mankoo, associate at FB Attorneys, in Tanzania.
He notes that “The National Payment Systems Act, 2015 and its regulations restrict persons/entities from providing payment services unless with the licence issued by the Bank of Tanzania.”
The Tanzania Anti-Money Laundering Regulations of 2022 published in June, provide for the mode of conducting risk assessments, anti-money laundering counter terrorist financing, and counter proliferation financing policies and procedures, says Mankoo.
In addition, Tanzania’s Cybercrimes Act, 2015 provides for criminalising offences related to computer systems and information technologies and for investigation, collection and use of electronic evidence and other matters relating to cybercrimes, he says.
Cameroon (and CEMAC)
Banking regulations in the Economic and Monetary Community of Central Africa (CEMAC) apply to the six-member states, namely Cameroon, Central African Republic, Chad, Equatorial Guinea, Gabon, and the Republic of Congo, says Danielle Moukouri, managing partner at D. Moukouri and Partners.
She says on May 6, 2022, the Central African Banking Commission (COBAC), that implements the supervision of the banking system in the CEMAC zone, released the COBAC Decision D-2022/071 on holding, using, exchange, and conversion of cryptocurrency or crypto assets by institutions regulated by COBAC.
In essence it ruled that banks, microfinance institutions, payment institutions, exchange offices, and their technical partners in the CEMAC are prohibited from using crypto-assets, including the subscription or holding of crypto-currencies of any kind for their accounts or the account of third parties.
However, the Ministerial Committee of the Central African Monetary Union (UMAC), in July 2022, subsequently instituted a new category of intermediaries known as ‘digital asset service providers’, says Moukouri.
If the expected General Regulations of COSUMAF – the Central African financial market supervisory committee – adopt the universal meaning of ‘virtual assets,’ the term could include various forms of digital currencies.
Considering this, the new regulation does make room for digital tokens and a blockchain-like technology. Therefore, in the CEMAC zone, the regulation on digital asset operations is evolving, she says.
One of the key laws on anti-money laundering in the CEMAC zone is Regulation No. 01/CEMAC/UMAC/CM of 11 April 2016 on the Prevention and Suppression of Money Laundering and the Financing of Terrorism and Proliferation in Central Africa.
Additionally, Law No. 2010/012 of 21 December 2010 on Cybersecurity and Cybercrime in Cameroon sets the framework for the prevention and repression of cybercrime.
Driven by the quest for financial inclusion and the development of the digital economy in the subregion, the Central African Interbank Electronic Banking Group (GIMAC) was created with the objective of setting up a regional platform to optimize interoperability between financial institutions in the CEMAC zone.
Since July 2020, interoperability is fully operational in the CEMAC zone, thanks to the launch of the GIMACPay interoperability platform, which is a convergent ecosystem of card, mobile and money transfer, says Moukouri.
“This innovation in the payment landscape brings together hundreds of participants and promotes increased commercial activities and integration within the subregion and internationally,” she says.