Bitcoin poses challenges as BoT calls for caution

Dar es Salaam. Following growing appetite among Tanzanians to invest in cryptocurrencies, the Bank of Tanzania (BoT) is studying how the new phenomenon can be regulated.

A cryptocurrency is a digital, or virtual currency, that uses cryptography for security. A defining feature of digital currencies is the fact that they are not issued by any central authority, making them theoretically immune to government interference or manipulation. One such currency is the bitcoin.

Among companies in the country involved in the business, according to a survey by The Citizen, is Cryptocurrency International Tanzania Limited (CITL), which provides a platform for buyers to acquire digital cash using credit cards.

The director of National Payment Systems at BoT, Mr Bernard Dadi, told The Citizen that the concept of cryptocurrencies was still new in the country, and central banks around the world were still grappling with the intricacies of the technology.

“BoT is currently studying internet currencies with a view to finding a permanent regulatory solution,” he said. Mr Dadi added that the cryptocurrency business was available to anyone with access to the Internet, adding that this made its regulation difficult.

He added that BoT was consulting with prominent international financial institutions as well as peer central banks on the way forward.

“The Bank of Tanzania is, in the meantime, taking a cautious approach by warning members of the public on the risks associated with internet currencies.”

Mr Dadi said there was currently no legal framework to regulate cryptocurrencies within Tanzania through BoT.

He voiced BoT’s concern about the difficulty in controlling the spread of bitcoins since they were used online and were available to anyone with access to the Internet.

“There is no mechanism to prevent the public from accessing cryptocurrencies outside Tanzania’s jurisdiction without blocking public access to the Internet,” Mr Dadi said.

It has been noted that the anonymous nature of cryptocurrencies increases the risks of money laundering, among other vices.

“It is very worrying, considering that cryptocurrencies are not issued by traditional institutions such as central banks. This amplifies the risks of financial instability,” Mr Dadi said.

The emergence of digital currencies has put governments worldwide in an awkward position, with the risk of compromising the integrity of financial systems and recognised institutions becoming a reality.

Worldwide, a regulatory balance has not yet been struck, and governments have reacted differently to the introduction of the bitcoin and other cryptocurrencies.

Apart from bitcoin other popular forms of cryptocurrency are litecoin, namecoin and PPCoin.