The concept of money as a medium of economic transaction has evolved over time and is expected to continue to do so with the development of new technology. In line with this evolution is the drift towards a cashless society, which has challenged traditional concepts of money, from paper/coins to computer bits. In this regard, Cryptoassets, otherwise known as cryptocurrencies, have emerged to reconceptualise previously held ideas about money. Cryptocurrencies exist in such forms as bitcoins, ethereum and litecoin. However, describing cryptocurrencies as legal tender would be stretching their legitimacy too far, because, as the Law Library of Congress suggests, a legal tender can only be issued by a country’s central bank, and since cryptocurrencies are not so issued, they cannot be properly described as legal tender. This position is supported by s41 of the Bank of Ghana (BoG) Act, 2002 (Act 612), which describes legal tender only in terms of coins and paper notes.
The above being the case, the BoG expressed uneasiness about the operation of digital currencies in Ghana. In a 2018 Notice No. BG/GOV/SEC/2018/02, the BoG cautioned the public against its usage. The practical effect of the BoG’s notice is that cryptocurrencies are neither legal nor illegal in Ghana. Information on some internet websites such as paxful.com, however, suggest that transaction in cryptocurrencies may be going on in Ghana. In an apparent response to and in anticipation of newer technology, the BoG set up the Office of FinTech and Innovation (OFI) to “be responsible for licensing and oversight of dedicated electronic money issuers (mobile money operators), payment service providers (PSPs), payment support solutions and other emerging forms of payment delivered by non-bank entities.” Unlike Ghana, some countries, including Algeria, Bolivia and Morocco, are wary of the perceived or assessed risks and have therefore banned the use of cryptocurrencies. Yet, some governments, including Belarus, Gibraltar, Jersey, and Mexico, have enacted specific laws recognizing and regulating cryptocurrency markets. Given the diversity in regulatory approaches to cryptocurrencies, it is pertinent to interrogate the BoG’s future stance on cryptocurrencies and identify relevant factors that should drive the decision-making process.
The Case for Cryptocurrencies
In a KPMG report titled Institutionalisation of Cryptoassets, the authors noted that there were real problems in the global financial services ecosystem that cryptoassets were looking to address and that more participation from the broader financial services ecosystem, would help drive trust and help the crypto market grow and mature. The report detailed the following examples of crypto use cases:
- Bitcoin –Proposed as an investible asset class like unallocated gold, which has the potential to become a store of value that is natively digital, generationally relevant, and an alternative to traditional asset classes.
- Ethereum– Touted as having enabled Initial Coin Offerings (ICOs) as an alternate means of raising capital.
- Litecoin – Projected as having been used to transfer the equivalent of $99 million for less than $1 of transaction fees within minutes.
Other cases for cryptocurrency include anonymity (which can as well be a con), transparency and speed of transaction.
The Case against Cryptocurrencies
In spite of the good news cited above, gnawing mistrust continues regarding the use of cryptocurrencies. The BoG’s suspicion is shared by other central banks across the globe, among which are the central banks of Iran, China and the Reserve Bank of India (RBI), as stated in its draft document “Draft Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019”. According to the RBI, the use of crypto or virtual currency is not in the public interest due to the ‘risks’ involved in it. The French Financial Market Authority and Prudential Supervisory Authority recently issued a joint notice to warn investors that cryptocurrencies were unregulated and particularly volatile investments. An earlier report explained that Bitcoin could not be considered a real currency or means of payment under current French laws and criticized it as a vehicle for speculation as well as an instrument for money laundering and other illegal activities. On its part, the Central Bank of Iran (CBI) officially announced on 22 April 2018, that it had prohibited the handling of cryptocurrencies by all Iranian financial institutions, including banks and credit institutions, mainly as a means to combat money laundering and the financing of terrorism. A statement issued by Bank of Israel on 19 February 2014, warned the public against dealing in virtual currencies, stating dangers including fraud, money laundering, and financing of terrorism. Within the Ghanaian context, money laundering, terrorism financing, high incidence of cyber fraud and low level of financial/digital currency literacy are considered some of the red flags that should be considered by the OFI when considering the regulation of cryptocurrencies in Ghana.
Whither Direction is Ghana Bound?
The risks of dealing in cryptocurrencies, as highlighted by the countries that have either banned or restricted their use, can be summarized into: Money-laundering, terrorism financing, and organized crime. As a country, Ghana faces these same challenges. In a 2018 United Nations-website article, the author hinted about Africa being the next frontier for cryptocurrencies. However, with a history of ponzi schemes, and a real risk of money laundering to fuel instability and terrorism – both of which are prevalent in West Africa, particularly the Sahel Region, Nigeria’s Boko Haram threat and a creeping peril of secessionist campaigns in the Volta Region of Ghana – it is submitted that the OFI should exercise great care in formulating policies that could lead to the legalisation of cryptocurrencies in Ghana. Furthermore, with an estimated literacy rate of 79% and a low level of financial literacy among university students in Ghana as suggested by a 2015 research study conducted in twelve of the country’s public and private universities, it is estimated that an appreciation of cryptocurrencies as a medium of financial transaction is very limited among the majority of Ghanaians. The need for financial/digital currency literacy among the public should, therefore, be considered as a precursor to the legalisation of cryptocurrencies in Ghana. Finally, it is important that the National Cybersecurity Centre (NCSC) is well-resourced and has in place measures to effectively deal with foreseeable breaches related to the use of cryptocurrencies. As at the time of writing this article, the list of current threats on the NSCS’s advisory page does not include threats or guidance related to cryptocurrency transactions. It is therefore suggested that the NSCS begins to roll out risk management measures including caution notes, targeted at dealing with the use of cryptocurrencies in Ghana.
Major Selasie Atuwo (Rtd) is a lawyer and has keen interest in Cyberspace Laws and Regulations, ICT Law, Privacy and Data Protection Law, FinTech, Artificial Intelligence and laws relating to National and Private Security.