Bitcoin not recognised by BoN

The Bank of Namibia (BoN)has finally expressed its position on bitcoin, saying that it does not recognise the popular cryptocurrency which was first introduced in 2009.

“The bank wishes to advice all stakeholders that it does not consider virtual currencies as legal tender in Namibia. Virtual currencies are therefore not to be considered equivalent to the Namibian currency,” BoN spokesperson Kazembire Zemburuka said.

While not stopping the use of bitcoin, Zemburuka stressed that people using the currency do it at their own risk.

“Trading in virtual currencies is not regulated in Namibia and thus individuals that engage in such trading would be doing so at their own risk. Virtual currencies are considered unsafe and thus individuals that engage in such trading would be doing so at their own risk,” said Zemburuka.

According to him, users of virtual currencies should also be aware of risks related to money-laundering and the financing of terrorism when trading in virtual currencies.

The central bank however welcomed the possible benefits of distributed ledger technologies, which it said may hold positive benefits.

“The Bank of Namibia recognises the potential positive impact that distributed ledger technologies might have in Namibia and, as such, intends to conduct further research on the possible uses for such technologies,” he said.

The central bank defined distributed ledgers as a database that is consensually shared and synchronised across networks, spread across multiple sites, institutions or geographies.

The central bank, Zemburuka said, would monitor the use of virtual currencies and possible impacts on monetary policy, price stability and the demand for money.

Bitcoin tumbled the most since July after China's central bank said initial coin offerings (ICO's) were illegal and asked all related fundraising activity to be halted immediately, issuing the strongest regulatory challenge so far to the burgeoning market for digital token sales.

The People's Bank of China said on its website on Monday that it had completed investigations into ICOs, and would strictly punish offerings in the future while penalising legal violations in ones already completed.

The regulator said that those who had already raised money must provide refunds, though it didn't specify how the money would be paid back to investors.

It also said digital token financing and trading platforms were prohibited from doing conversions of coins with fiat currencies. Digital tokens can't be used as currency on the market and banks are forbidden from offering services to initial coin offerings.

“This is somewhat in step with, maybe not to the same extent, what we're starting to see in other jurisdictions – the short story is we all know regulations are coming,” said Jehan Chu, managing partner at Kenetic Capital in Hong Kong, which invests in and advises on token sales.

“China, due to its size and as one of the most speculative Initial Public Offering (IPO) markets, needed to take a firmer action.”

Bitcoin tumbled as much as 11.4%, the most since July, to US$4 326.75. The ethereum cryptocurrency was down more than 16 percent Monday, according to data from Coindesk.

ICOs are digital token sales that have seen unchecked growth over the past year, raising US$1.6 billion. They have been deemed a threat to China's financial market stability as authorities struggle to tame financing channels that sprawl beyond the traditional banking system. Widely seen as a way to sidestep venture capital funds and investment banks, they have also increasingly captured the attention of central banks that see in the fledgling trend a threat to their reign.

STAFF REPORTER