Virtual currencies are not legal tender and considered unsafe: Bank of Namibia

The Bank of Namibia has released a new position paper on distributed ledger technologies and virtual currencies in the country.

The central bank said that based on its understanding virtual currencies are unregulated with no legal tender status or relations to any central bank or public authority of a particular jurisdiction. It added:

“In addition to the Bank not recognising virtual currencies as legal tender in Namibia, it also does not recognise it to be a foreign currency that can be exchanged for local currency. This is because virtual currencies are neither issued nor guaranteed by a central bank nor backed by any commodity.

“The Bank does not consider virtual currencies as payment instruments, even though they can be used in the provision of payment services and the facilitation of payment transactions.”

The bank further said that as the use of virtual currencies in Namibia is not prominent at present, the bank believes that virtual currencies do not pose any significant threats to the financial stability or monetary policy of Namibia. It also outlined the various legal, credit, liquidity, and operational risks related to digital currencies which users should be aware of.

“Virtual currencies are not legal tender and are considered unsafe to users that are unaware of the risks it possesses…Additionally, the trading of virtual currencies in Namibia is not currently regulated and individuals that engage in such trading would be doing so at their own risk and should exercise caution,” it said.

The central bank also recognized the potential of distributed ledger technology, saying that it could “introduce efficiencies and less costly methods in the financial market space.” However, as such technologies require deep understanding, the bank said that further studies are required to fully understand the possible uses and impact of DLTs.

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