Ghana issues draft digital asset guidelines

Ghana’s central bank has published new draft guidelines for the digital asset sector, requiring all virtual asset service providers (VASPs) to obtain licensing from the country’s securities watchdog before serving investors.

Ghana is one of Africa’s leading digital asset markets. A recent survey from Finder revealed that 17% of Ghanaians own digital assets, the ninth-highest rate globally. However, like most other African countries, it lacks a comprehensive framework for the sector.

The Bank of Ghana (BoG) seeks to change this with its draft guidelines on digital assets, published recently following extensive internal review and engagement with stakeholders. The bank acknowledged that while digital assets could enhance financial inclusion, ease cross-border transfers and offer new economic opportunities through tokenization, they pose challenges such as fraud, money laundering and cybercrime.

BoG proposes that VASPs abide by a set of standards that prevent money laundering, terrorism financing and customer exploitation. They must also conduct comprehensive risk assessments and report financial crime in accordance with global best practices.

The central bank revealed that its draft guidelines were informed by guidance from global bodies, including the Financial Stability Board (FSB) and the Financial Action Task Force (FATF). It will apply the latter’s Travel Rule for Ghanaian VASPs, requiring them to share information on the initiators and recipients of digital asset transactions. South Africa implemented the Travel Rule for VASPs two years ago.

The new guidelines cement the Securities and Exchange Commission’s (SEC) authority over VASPs. BoG proposes that the securities regulator assists it in developing complementary regulations for specific aspects of the digital asset market.

The proposed framework will allow commercial lenders to offer banking services to any licensed VASP. This has been a universal challenge for digital asset businesses, with most banks fearing regulatory reprisal as the sector remains unregulated in most countries. In Ghana, the BoG prohibits banks from facilitating digital asset transactions.

If the framework is adopted, all VASPs must apply for a license from the BoG or the SEC, depending on the product offerings. Those who fail to register within the given timeline will be considered operating illegally.

To obtain the license, the applicants must have an adequate governance and ownership structure and demonstrate satisfactory risk management frameworks and consumer protection systems.

The top bank says that the proposed guidelines aim to protect consumers, maintain the financial sector’s stability, foster innovation and promote international cooperation in combating financial crime.

The bank invited the public to submit feedback by the end of August.

Ghana’s blockchain ventures

BoG continues to explore the potential of blockchain in public service, tokenization and a prospective central bank digital currency (CBDC). While the eCedi was once one of Africa’s most advanced CBDC projects, it has since been overtaken by neighboring Nigeria’s eNaira.

In May, the top bank revealed that it had been collaborating with the Monetary Authority of Singapore (MAS) on a cross-border CBDC project.

The project focused on easing payments between small- and medium-sized enterprises (SMEs) in the two countries with a CBDC, verifiable digital credentials and smart contracts. The latter allowed lenders to program their loans and disburse them to SMEs through a CBDC, ensuring that the recipients only used it for its stated purpose. According to BoG, nearly 100% of the participants in its sandbox who received the programmed loans repaid them on time.

On the MAS side, participants received the funds through the xSGD stablecoin.

After completing the first phase, Ghana has invited Rwanda to be the third member in the next phase, which will extend to other sectors, such as supply chain financing and involving multiple currencies.