1.0 Introduction
Following an extensive internal review of the surging popularity of digital assets
like cryptocurrencies such as Bitcoin and Tether (USDT) in Ghana, and
engagements with various stakeholders, the Bank of Ghana issues draft
guidelines on digital assets. These guidelines are intended to expose the Bank’s
proposed regulatory measures and solicit feedback from industry and the
public. This is in line with the Bank’s commitment to continuously evolve a
conducive regulatory environment that promotes financial inclusion and
enhances financial stability.
Over the past three (3) years, the use of various digital assets by Ghanaians has
recorded a significant increase on account of factors such as high mobile
money penetration, a tech savvy youth demographic, high internet usage
and the rise of online companies offering crypto and virtual asset services,
popularly known as Virtual Asset Service Providers (VASPs).
While acknowledging the innovative and beneficial applications of digital
assets in cross-border payments, charitable donations, crowdfunding,
international remittances, as well as the economic opportunities presented by
asset tokenization, the Bank remains vigilant in addressing potential
drawbacks. These include risks related money laundering and terrorism
financing (ML/TF), fraud, cyber-theft, capital flows and consumer protection
concerns.
Furthermore, the Bank has taken note of the guidance and regulatory
frameworks issued by prominent International Standard Setting Bodies (SSBs),
including the Financial Stability Board (FSB), the Financial Action Task Force
(FATF), International Organization of Securities Commissions (IOSCO) as well as
the policy approaches of some jurisdictions regarding digital asset regulations.
This proposed regulatory measures in this exposure draft have been crafted
with a dual objective: to foster innovation while effectively managing risks
associated with digital assets
Notwithstanding this exposure draft, the Bank’s notice No.
BG/GOV/SEC/2022/23, prohibiting banks and payment service providers (PSPs)
from facilitating crypto asset transactions remains effective until formal
regulatory guidelines are published.
2.0 Definitions of Key Terms
Digital assets: These refer to any form of electronically stored or encoded
content with intrinsic value. They encompass a wide range of assets such as
virtual assets (e.g., Bitcoin), tokenized assets representing real-world items,
digital documents, and multimedia files.
Virtual assets: As defined by the Financial Action Task Force (FATF) are digital
representation of value that can be digitally traded, or transferred, and can
be used for payment or investment purposes. Virtual assets are not considered
legal tender in most jurisdictions, but they are used for a range of activities,
including transactions and investments.
Virtual Asset Service Providers (VASPs): are entities that provide a range of
services associated with crypto and virtual assets. These services encompass
exchange, wallet, brokerage, custodian, and transfer services, as well as
facilitating fundraising through Initial Coin Offering/Security Token Offering
(ICOs/STOs) and offering financial advice and management.
Virtual asset exchanges: also known as cryptocurrency exchanges or digital
asset exchanges, are platforms that facilitate the buying, selling, and trading
of cryptocurrencies and other digital and virtual assets.
Stablecoins: Stablecoins are a type of virtual asset designed to maintain a
stable value, typically by being pegged to a stable asset such as a fiat
currency (e.g., USD, EUR), commodities (e.g., gold), or a basket of assets. They
differ from other cryptocurrencies in that they aim to minimize price volatility.
3.0 The Digital Asset Landscape
The digital asset landscape in Ghana is evolving, with increasing interest and
adoption of crypto assets and blockchain technology, supported by a
growing number of exchanges and initiatives in the country's financial
ecosystem.
This trend has been driven by factors such as high mobile money penetration,
tech savvy and youthful population, high internet usage among Ghanaians
and the influence of online regional and global companies offering crypto or
virtual asset services, particularly the VASPs.
The digital assets ecosystem in Ghana is primarily controlled by entities
facilitating the buying, selling, and trading of virtual assets. These platforms
provide liquidity and access to cryptocurrencies with stablecoins and Bitcoin
being the most widely recognized and utilized. Additionally, Ether (on the
Ethereum network) and various alternative crypto assets (altcoins) also hold
significant prevalence within the market. Although these transactions have
relatively insignificant volumes compared to the broader digital payments, the
dynamic growth of digital asset calls for regulatory clarity to ensure adequate
financial stability and consumer protection.
Furthermore, some Ghanaian startups and organizations are exploring
blockchain technology for solutions in sectors like agriculture, healthcare, and
financial services. Such initiatives have been acclaimed to hold great potential
at improving transparency, efficiency, and security in various industries.
Regarding regulation, the Bank of Ghana has provided clarity on the
regulatory status of virtual assets through notices No. BG/GOV/SEC/2018/02
and BG/GOV/SEC/2022/23 to the public with specific directives to regulated
entities. Additionally, the Bank has adopted a cautious "wait-and-see"
approach, closely monitoring market developments related to crypto assets,
including a limited stakeholder engagement in 2023. This approach is designed
to enhance the Bank's preparedness to maintain financial stability and
develop an appropriate regulatory framework in response to evolving trends.
Despite the growing interest, the digital assets landscape in Ghana faces
challenges such as regulatory and legal uncertainty, cybersecurity risks, market
manipulation and consumer protection concerns.
Overall, Ghana's digital assets landscape has been dynamic, with increasing
interest in virtual assets and blockchain technology. However, the Bank of
Ghana acknowledges regulatory challenges and is working towards a more
structured framework to support safe, responsible, and sustainable growth and
innovation in the sector.
4.0 Policy Thinking
The use cases of virtual assets cut across payments, banking, and securities
trading, with all but the last category falling under the regulatory mandate of
the Bank. Also, the increasing rate of cross-transactions between virtual assets
and fiat money (Ghana Cedi and US Dollar, for example) otherwise known as
on-ramping and off-ramping, as well as rising demand for foreign currency to
engage in crypto asset transactions calls for an enhancement of the Bank’s
monitoring and regulatory scope on these activities to safeguard the integrity
of the financial sector.
The Bank also takes notice of the amendment of FATF Recommendation 15,
which requires countries to assess and mitigate the risks associated with virtual
assets (VAs) and Virtual Assets Service Providers (VASPs); license or register
providers and subject them to supervision or monitoring by competent national
authorities.
5.0 Regulatory Objectives
The main objectives of the proposed regulatory framework are as follows:
1. Ensure integrity and stability of the financial sector;
2. Protect consumers and Investors;
3. Guard against Financial Crime (AML/CFT);
4. Foster innovation and market integrity;
5. Promote domestic coordination in managing risks posed by crypto asset
service providers;
6. Promote international cooperation in combating financial crime; and
7. Address cyber security risks.
6.0 Scope of Proposed Regulation
In line with its regulatory mandate, the Bank’s regulatory framework may target
exchanges and other platforms offering buying, selling, trading, and custody
services of virtual assets. The framework will specify which asset types are
covered and address interactions between regulated financial institutions and
VASPs. The Bank will collaborate with other regulatory agencies, such as the
SEC, to develop and implement complementary frameworks aligned with
each institution's regulatory mandate. This approach will ensure a
comprehensive regulatory framework to effectively address the diverse use
cases of virtual assets.
7.0 Proposed Regulatory Approach
In response to the need for regulatory clarity on digital asset activities, and
subject to a satisfactory sandbox testing process involving a limited number of
VASPs, the Bank of Ghana intends to evolve a comprehensive regulatory
framework in collaboration with other relevant regulatory bodies in a
structured manner. The proposed framework may feature the following and
other proposed measures:
a. Regulation of virtual Asset Service Providers (VASPs), within a defined set
of services, for money laundering (ML) and terrorism financing (TF),
consumer protection and any other measures the Bank may deem
appropriate. This means VASPs would be required to perform customer
due diligence and transaction monitoring, and report suspicious
transactions to the Financial Intelligence Centre (FIC);
b. VASPs including exchanges would be required to conduct
comprehensive risk assessments and implement a risk-based approach
in preventing and reporting financial crime, aligning with global best
practices. Furthermore, compliance with FATF's Travel Rule would be
required. This rule necessitates the sharing of information on originators
and beneficiaries of transactions.
c. The Bank would collaborate with the Securities and Exchange
Commission (SEC) to develop distinct complementary regulatory
frameworks that encompass various applications or use cases of digital
assets. These frameworks would be informed by the specific mandates
of both the BOG and SEC;
d. Enhanced Payment Service Providers (EPSPs) may be permitted to
process virtual asset transactions, exclusively for registered VASPs (i.e,
when a registration framework is established), subject to prior
authorization from the Bank. However, EPSPs would be prohibited from
operating exchanges or engaging in any other virtual asset-related
businesses, owning, or holding virtual assets, or providing custodial
services. Shareholders may establish separate entities for virtual asset
activities, provided that funding for such ventures is not sourced from the
EPSP. The Bank would supervise to ensure compliance with these
regulations.
e. Commercial banks would be permitted to offer banking, payment, and
settlement services exclusively for registered VASPs, subject to the same
set of conditions outlined for EPSPs above.
f. Once a regulatory framework or guidance is established, all Virtual Asset
Service Providers (VASPs) currently operating in or intending to operate
in Ghana would be required to apply for authorization from either the
Bank of Ghana or SEC, depending on their specific product offerings.
VASPs that do not register within the specified timeline will be considered
to be operating illegally in the country;
g. Potential registration requirements to operate within the proposed
framework may include a detailed company profile, including
governance and ownership structure, and the latest audited or
projected financials. Applicants must demonstrate a satisfactory internal
control and risk management framework, as well as evidence of
registration and an office address in Ghana. Additionally, a
comprehensive description of the technology stack, asset storage and
access control procedures, consumer protection measures,
cybersecurity practices, and data privacy policies, all in alignment with
existing regulations, may be required. Prospective applicants may also
need to meet specified minimum capital and solvency requirements;
h. Virtual asset service providers to be required to ensure adequate
education and risk disclosures such that users are well informed about
the risks of dealing in such transactions.
Furthermore, the Bank together, with stakeholders, would continue to
investigate the potential of blockchain in a quest to transform financial service
delivery, exploring synergies with its digitalization and inclusion initiatives such
as the e-Cedi, and assessing the economic opportunities presented by
tokenization.
8.0 Consultation Process
The Bank values the perspectives and recommendations of industry players,
experts, and the public regarding the proposed regulatory measures outlined
in this document. This inclusive approach aims to ensure that the regulations
for digital assets are effective, balanced, and conducive to sustainable
development and innovation, while also promoting financial stability. The Bank
will consider these inputs in determining the next steps forward. Kindly therefore
send responses and or/ recommendations regarding the proposed measures
to the Bank of Ghana by or before August 31, 2024. Submissions should be sent
to FinTech@bog.gov.gh
