Rwanda Advances Regulation of Virtual Assets with New Legal Draft

Rwanda’s National Bank and Capital Market Authority have proposed a draft law to regulate virtual assets and service providers, promoting innovation while mitigating risks such as money laundering. The framework aims to enhance buyer protection and ensure the transparency of digital financial transactions. Public consultation has started, with the goal of implementing clearer oversight in the evolving landscape of virtual assets.

The National Bank of Rwanda (NBR) and the Capital Market Authority (CMA) have unveiled a draft regulatory framework aimed at overseeing virtual assets and their service providers. Recognized as vital in the capital market, these virtual assets are defined as digital representations of value capable of being traded, transferred, or utilized for payments and investments. The proposed regulation encompasses assets based on blockchain technology, regardless of cryptographic security, and those backed by collateral to stabilize their value.

The framework seeks to promote innovation alongside the mitigation of risks associated with virtual assets. It specifically aims to address concerns related to money laundering and terrorist financing, as articulated by Carine Twiringiyimana, Manager of Licensing and Approvals at CMA. She noted the Financial Action Task Force’s concerns regarding the potential misuse of virtual assets for illicit financial activities, reinforcing the importance of establishing clear regulations for the public and service providers.

Published for public consultation on March 6, the draft law aims to ensure transparency and invite public commentary. Twiringiyimana further explained that while cryptocurrency is prevalent, the regulation also targets tokenization of physical assets. She emphasized that tokens representing Rwandan currency will be strictly forbidden to prevent misuse and manipulation of virtual assets.

The regulations strive to provide clarity and oversight for both digital currencies and digital representations of real-world assets, supporting secure and transparent transactions. Twiringiyimana mentioned that with the new regulations, buyers will enjoy better protection and sellers will be legally obligated to fulfill their commitments. Legal entities seeking to provide virtual asset services must apply for a license from the CMA, which will outline the necessary requirements.

Traders such as Gaspard Nsekambabaye expressed optimism regarding the new framework, believing it could significantly protect buyers from fraudulent practices in crypto trading. He pointed out the prevalence of scams where buyers transfer funds without securing their assets, resulting in losses that are hard to trace. Registration of sellers is seen as a step toward combating this issue.

For those affected by fraudulent transactions, assistance awaits from the Rwanda Investigation Bureau (RIB), which currently investigates financial crimes, including those involved in virtual asset trading. Nonetheless, since crypto trading has not been legalized, victims struggle to achieve justice, complicating investigations. Upon the finalization of these regulations, clarity will be established for trading virtual assets, enhancing transparency for traders, as CMA is set to oversee compliance, licensing, and operational dynamics in this domain.

In summary, the Rwanda regulatory framework for virtual assets, initiated by NBR and CMA, marks a significant advancement in governing digital financial transactions. The proposed rules aim to enhance innovation, mitigate associated risks, and provide legal protection against fraud. By facilitating transparency and establishing clear regulations, Rwanda aspires to foster a secure and regulated environment for both virtual assets and their service providers, enhancing buyer security in the cryptocurrency market.

Original Source: www.newtimes.co.rw